With these facts in mind I present a simple contractual model of labor
supply with a minimum-hours threshold. Following Rosen (1985), the model
assumes a nonconvexity in the relation between hours per worker and effective
labor input. This nonconvexity generates a two-part hours schedule.
In periods of low employment demand some individuals are temporarily laid
off, while others work a minimum-threshold level of hours. In periods of
high demand all available workers are employed at hours in excess of the
minimum threshold. The model provides a simple explanation for the finding
of Ham (1986) that measures of annual labor supply vary with demand-side
indicators, even controlling for wages. According to the model, changes in
the probability of employment in any particular week vary with employer-