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Chapter9LaborMarkets,9.1THEECONOMICIMPROTANCEOFLABORMARKETS,Competitivelabormarketwheretheforcesofdemandandsupplyinteracttodeterminewageratesandemployment.Labormarketchannelintheeconomythroughwhichsuppliesofessentiallaborareobtainedbyfirmsatacceptablepricesandthroughwhichthepopulationobtainsmostofitslivelihoodbysellingitslaboratofferedwagesandsalaries.,9.1.1InputandLivingStandards,Firms:hiringoflaborinordertoachievetheirobjectives,Household:supplyinglabortoachievedesiredincomesorstandardsofliving.,makechoices,bestchoices,9.1.2TheCentralityofLabor,exchangevalue(price)sharingofpowerintheeconomydistributionofearningsandwealth,9.1.3LaborMarketasVehiclesforChoices,HouseholdsWhichoftheirmembersaretoseekemployment(full-timeorpart-time)WhatsearchactivityWhichjobWhichmembersaretoreceiveeducationandtrainingWhichmemberaretodotheworkofthehouseholdWhichmemberaretomigrateConsiderRatesofpayTimingCostsofeducationandtrainingCostsofmigrationandrelocation,FirmsHoursoflaborneededBestmixoflaborandotherinputs(machinery)TypesoflaborneededHiringandfiringLevelsof“onthejob”trainingSearchforlaborRatesofpay,RatesofpayEmploymentlevels,Thelabormarketisthekeyinstitutionalvehiclewhichfacilitatesthemakingofthesechoices.,9.2THELABORFORCE:DEFINITIONANDMEASUREMENT,9.2.1LaborForceLaborForcethesumofnumberofunemployedandemployedpersons,forachosentimeperiod.thenumberofpeople,aged15andover,whoworkedforpayorprofit,orwhowereunemployed.Employedthosewhoworkedforonehourormoreformonetaryreturnorwhoworkedfor15hoursormoreofunpaidworkinafamilybusiness.Unemployedthosewhoareavailableforworkandwhoareactivelylookingforemployment.Notinthelaborforcethosewhoareneitheremployednorunemployed.theaged,theveryyoung,full-timestudents,9.2.2ParticipationRate,ParticipationRatetheproportionofthespecificpopulationthatisinthelaborforce.expectedratesofpay,taxationrates,socialwelfarepayments,incomeofotherhouseholdmembersUnemploymentRatetheratioofthenumberofunemployedtothelaborforce.cyclicalunemployment,hiddenunemployment,structuralunemployment,seasonalunemployment,naturalrateofunemployment.,Cyclicalunemploymentunemploymentcausedbytheeconomysbusinesscycleperformance.Hiddenunemploymentthenumberofpeoplewhoarenotemployed,whowouldliketoworkandwhohavegivenuplookingforworkbecauseofthepoorconditionoftheeconomy.(discouragedworkers)Structuralunemploymentthenumberoftotalunemployedwhoareunemployedbecauseofthemismatchbetweenjobsavailableandtheskillsoftheunemployed.Seasonalunemploymentthenumberoftotalunemployedwhoareunemployedbecauseofseasonalfluctuationsintheeconomy.Naturalrateofunemploymenttheunemploymentratewhichisnormalforacountry.,9.3LOBORSUPPLY:HOUSEHOLDSCHOICES,Economicmodelofhouseholdchoiceinlabormarketmakethebestchoice(maximizingutility)RegardingthesupplyofhoursofworkinvestmentinhumancapitallabormigrationSimpleModelpeoplechoosingtoallocatetheirtotalavailablehoursbetweenworkforpayandleisure.,Wageratehasincreased,morehoursofworkwouldofferedpriceofleisurehasincreasedhouseholdhaschosentopurchaselessleisure,choosingmorehoursofworkfewerhoursofworkwouldofferedhouseholdsincomeisnowsohighitchoosestoofferlessworkandtakemoreleisuresamehoursofworkwouldoffered,MarketSupplyoflabor,morehoursareofferedathigherwageratesapositiverelationWage-ElasticityofSupplytheresponsivenessoflaborsupplytochangesinthewagerate.Whatcausesthelaborsupplycurvetoshift?ChangeinemploymentrateChangeinincometaxrateChangesintastesChangesinalternativeopportunitiesImmigration,9.4THEDEMANDFORLABOR:FIRMSCHOICES,Economicmodeloffirmchoiceinlabormarketmakethebestchoice(maximizingprofit)Regardinghoursofemploymenttodemandworkertrainingratesofpayderiveddemandmarginalproductoflaborvalueofmarginalproductdiminishingreturnscontributionofadditionalhoursoflabortorevenuewillalsofall.,MarketDemandforLabor,aninverserelationbetweenwagerateandthequantityoflabordemand.Wage-elasticityofdemandtheresponsivenessoflabordemandedtochangesinthewagerate.Whatcausesthelabordemandcurvetoshift?theoutputpricetechnologicalchangethesupplyofotherfactors,9.5CategoriesofLaborMarket,9.5.1TheCompetitiveLaborMarketCharacterizedbylargenumbersofbuyersandsellers.nobuyerorsellerhasanymarketpowerandthewagerateandlevelofemploymentisdeterminedbycompetitivemarket.Equilibrium(inbalance)demandandsupplycurveintersect.themarketclearsatthiswage;allthosewhowishtoworkatthiswagerateareemployed.,9.5.2OtherTypesofLaborMarkets,intermsofcompetitioncompetitivelabormarketnon-competitivelabor
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