Introduction

Much economic analysis is based on stylized relations between the nature of economic processes and the functions economists use as their tools of analysis. For example, if production processes are duplicable, constant returns to scale production functions are obtained. The student of elementary economics is told that if goods are difficult to substitute, their demand is inelastic; if easy to substitute their demand is elastic. In similar fashion it is the purpose of this paper to categorize the nature of jobs and to show that it has implications for the elasticity of demand for labour with respect to the wage.

We see a job as like a dam site. A dam which underutilizes a dam site, even though productive in the sense that water is usefully stored or electricity is usefully produced, will nevertheless be costly in the sense that the valuable dam site is wasted. Even at zero cost (and hence a benefit/cost ratio of infinity) it may not pay to use a dam which underutilizes the site. We picture jobs and workers in the same way. Jobs are pictured as being like dam sites and workers of different skills as being like the potential dams on the dam site. Workers of sufficiently low skills will not be able to get jobs even at zero wages, not because their output on those jobs is negative, but because they underutilize the jobs themselves.