Chapter 9 Labor markets
Chapter 9 Labor Markets
9.1 THE ECONOMIC IMPROTANCE OF LABOR MARKETS Competitive labor market where the forces of demand and supply interact to determine wage rates and employment o Labor market channel in the economy through which supplies of essential labor are obtained by firms at acceptable prices and through which the population obtains most of its livelihood by selling its labor at offered wages and salaries
9.1 THE ECONOMIC IMPROTANCE OF LABOR MARKETS • Competitive labor market – where the forces of demand and supply interact to determine wage rates and employment. • Labor market – channel in the economy through which supplies of essential labor are obtained by firms at acceptable prices and through which the population obtains most of its livelihood by selling its labor at offered wages and salaries
9.1.1 Input and Living standards Firms: Household hiring of labor in order to achieve supplying labor to achieve desired incomes their objectives or standards of living make choices best choices
9.1.1 Input and Living Standards Firms: hiring of labor in order to achieve their objectives Household: supplying labor to achieve desired incomes or standards of living. make choices best choices
9. 1. 2 The Centrality of Labor exchange value(price) o sharing of power in the economy o distribution of earnings and wealth
9.1.2 The Centrality of Labor • exchange value (price) • sharing of power in the economy • distribution of earnings and wealth
9.1.3 Labor Market as Vehicles for Choices(Employment levels Households Firms Which of their members are to Hours of labor needed seek employment (full-time or Best mix of labor and other part-time) inputs(machinery) What search activity Types of labor needed Which job Hiring and firing Which members are to receive education and training Levels of"on the job"training Search for labor Which member are to do the work of the household Rates of pay Which member are to migrat te Consider Rates of pa The labor market is the Timing key institutional vehicle Costs of education and training which facilitates the Costs of migration and making of these relocation choices
9.1.3 Labor Market as Vehicles for Choices • Households – Which of their members are to seek employment (full-time or part-time) – What search activity – Which job – Which members are to receive education and training – Which member are to do the work of the household – Which member are to migrate • Consider – Rates of pay – Timing – Costs of education and training – Costs of migration and relocation • Firms – Hours of labor needed – Best mix of labor and other inputs (machinery) – Types of labor needed – Hiring and firing – Levels of “on the job” training – Search for labor – Rates of pay •Rates of pay •Employment levels The labor market is the key institutional vehicle which facilitates the making of these choices
9.2 THE LABOR FORCE. DEFINITION AND MEASUREMENT 9.2.1 Labor force e Labor force the sum of number of unemployed and employed persons for a chosen time period the number of people aged 15 and over, who worked for pay or profit or who were unemployed ● Employed those who worked for one hour or more for moneta return or who worked for 15 hours or more of unpa work in a family business Unemployed those who are available for work and who are actively looking for employment Not in the labor force those who are neither employed nor unemployed the aged, the very young full-time students
9.2 THE LABOR FORCE: DEFINITION AND MEASUREMENT 9.2.1 Labor Force • Labor Force – the sum of number of unemployed and employed persons, for a chosen time period. – the number of people, aged 15 and over, who worked for pay or profit, or who were unemployed. • Employed – those who worked for one hour or more for monetary return or who worked for 15 hours or more of unpaid work in a family business. • Unemployed – those who are available for work and who are actively looking for employment. • Not in the labor force – those who are neither employed nor unemployed. – the aged, the very young, full-time students…
9.2.2 Participation Rate Participation Rate the proportion of the specific population that is in the labor force expected rates of pay, taxation rates, social welfare payments income of other household members Unemployment Rate the ratio of the number of unemployed to the labor force cyclical unemployment, hidden unemployment, structural unemployment, seasonal unemployment, natural rate of unemployment
9.2.2 Participation Rate • Participation Rate – the proportion of the specific population that is in the labor force. – expected rates of pay, taxation rates, social welfare payments, income of other household members… • Unemployment Rate – the ratio of the number of unemployed to the labor force. – cyclical unemployment, hidden unemployment, structural unemployment, seasonal unemployment, natural rate of unemployment
Cyclical unemployment unemployment caused by the economy's business cycle performance. Hidden unemployment the number of people who are not employed, who would like to work and who have given up looking for work be because of Sa the poor condition of the economy(discouraged workers) uctural unemployment unemployed Seasonal unemployment the number of total unemployed who are unemployed because of seasonal fluctuations in the economy Natural rate of unemployment the unemployment rate which is normal for a country
• Cyclical unemployment – unemployment caused by the economy’s business cycle performance. • Hidden unemployment – the number of people who are not employed, who would like to work and who have given up looking for work because of the poor condition of the economy. (discouraged workers) • Structural unemployment – the number of total unemployed who are unemployed because of the mismatch between jobs available and the skills of the unemployed. • Seasonal unemployment – the number of total unemployed who are unemployed because of seasonal fluctuations in the economy. • Natural rate of unemployment – the unemployment rate which is normal for a country
9.3 LOBOR SUPPLY HOUSEHOLDS CHOICES o Economic model of household choice in labor market make the best choice(maximizing utility) Regarding the supply of hours of work investment in human capital labor migration ● Simple Model people choosing to allocate their total available hours between work for pay and leisure
9.3 LOBOR SUPPLY: HOUSEHOLDS’ CHOICES • Economic model of household choice in labor market – make the best choice (maximizing utility) • Regarding the supply of – hours of work – investment in human capital – labor migration • Simple Model – people choosing to allocate their total available hours between work for pay and leisure
Wage rate has increased 1. more hours of work would offered price of leisure has increased household has chosen to purchase less leisure, choosing more hours of work 2. fewer hours of work would offered households income is now so high it chooses to offer less work and take more leisure 3. same hours of work would offered
Wage rate has increased… 1. more hours of work would offered • price of leisure has increased • household has chosen to purchase less leisure, choosing more hours of work 2. fewer hours of work would offered • household’s income is now so high • it chooses to offer less work and take more leisure 3. same hours of work would offered