Labour Market

8 Key excerpts on "Labour Market"

• 

  eBook - ePub

  Economics of the Labour Market

  Unemployment, Long-Term Unemployment and the Costs of Unemployment

  • P. N. (Raja) Junankar(Author)
  • 2016(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  2 The Labour Market 2.1 Labor Economics P. N. Junankar The field of labor economics is involved with the study of the labor market, including the determinants of employment, unemployment, and wages. The labor market developed as societies moved from feudal to capitalist processes. The development of capitalism in turn led to powerful capitalist owners and an industrial workforce that was concentrated in factories. Conditions of work became, by present Western standards, dirty, demanding, and dangerous. As a result, workers organized unions and began to demand better pay and working conditions, and they set up political organizations like the Labour Party in the United Kingdom. Over the years, organized labor managed to achieve many of their goals, as legislation was introduced in many countries to provide minimum wages, poverty relief, unemployment benefits, and pensions, and to ensure safe working conditions. The labor market consists of employers, workers, and a government that provides an institutional and legal framework. The distinctive features of labor as a commodity are: (1) except for a slave society, people can only buy and sell labor services; (2) the quality of the labor services provided depends not only on the innate ability of the workers but also on their attitudes to work, to their fellow workers, and to their employers; (3) most employment contracts last for a fairly long time, so there are not frequent repeat purchases of this “commodity”; (4) there is asymmetric information in the labor market about the “quality” of labor services; and, (5) there is an unequal power relationship in the labor market. Labor markets are different from other markets. As Arthur Okun points out in Prices and Quantities (1981), they are not auction markets that clear instantaneously, but are influenced by “custom and practice.” For example, firing is usually based on last in, first out, and seniority is often given special privileges

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  A Web-Based Approach to Measure Skill Mismatches and Skills Profiles for a Developing Country: The Case of Colombia

  • Cárdenas Rubio, Jeisson Arley(Authors)
  • 2020(Publication Date)
  • Editorial Universidad del Rosario

    (Publisher)

  2. The Labour Market and Skill Mismatches 2.1. Introduction

  The Labour Market can be defined as a “place” (not necessarily a physical place) where employers (“demand”) and workers (“supply”) interact with each other. The dynamics of this Labour Market are relevant for an economy as they determine different socio-economic outputs, such as productivity, unemployment, wages, and poverty, among others. Provided that the Labour Market influences various outcomes and different disciplines address these issues (e.g. sociology, economy, etc.), this chapter discusses Labour Market definitions and explains the theoretical framework adopted throughout this book to analyse labour demand based on the information found on online job portals.

  The second section of this chapter explains what is understood by labour demand and labour supply in the academic literature on economics, and possible ways to statistically measure these concepts. Moreover, it defines and highlights informal economy as a key issue, especially in Latin American countries like Colombia. Subsequently, the concept of skills is introduced, and its possible implications for unemployment and informal economy are explained. With these basic definitions outlined, the third section of the chapter describes the Colombian Labour Market and its main outcomes, such as unemployment, wages, etc., under the assumption of perfect competition.

  However, the assumptions of perfect competition are substantial and might not be appropriate for different economies such as the Colombian economy. Consequently, it is necessary to consider Labour Market failures—for example, imperfect information—that might appropriately explain the comparatively high rates of informal economy and unemployment levels in Colombia. Thus, the fourth section of this chapter focuses on explaining how imperfect information might increase skill mismatches and, consequently, create Labour Market segmentation between formal and informal workers along with a comparatively high unemployment rate, proposing thus that information failures might be one of the leading causes of high unemployment and informality rates, especially in developing countries like Colombia.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Trading Economics

  A Guide to Economic Statistics for Practitioners and Students

  • Trevor Williams, Victoria Turton(Authors)
  • 2014(Publication Date)
  • Wiley

    (Publisher)

  3 Labour Markets . . . the power of population is indefinitely greater than the power in the earth to produce subsistence for man. Thomas Malthus 1 As we saw in the previous chapter, economic growth is dependent on a raft of factors. Not least among these are people – the population mentioned by Malthus in the above quote. The exchange of labour in return for a wage is one of the defining features of industrialised societies, driving living standards, through increased specialisation and innovation, to new levels, as Adam Smith pointed out in 1776. 2 In this sense, observing and understanding Labour Market trends are crucial to economic and social policy as well as investment decisions. Without human knowledge and skills, raw mate-rials would remain just that. It is human skill and the use of knowledge to develop production methods that transform materials into goods that people want and need and that drive global economic growth. Indeed, to understand the dynamics of an economy and its comparative performance, you have to understand its Labour Market. First of all, what is its productivity? Secondly, what is the composition of the labour force and how is it broken down into the different categories that can mean so much for whether long-term growth can be sustained? Thirdly, what is the number of people in the labour force as a whole and in these categories? It is well known that the ultimate drivers of economic growth are the productivity of the labour force plus the number of people of working age (together known as factors of production). So we need to know as much about these as possible to properly judge the long-term potential for growth. After all, that is where the value addition comes from that determines rising living standards and investment returns. 1 An essay on the principle of population, as it affects the future improvement of society with remarks on the speculations of Mr. Godwin, M. Condorcet, and other writers (London, 1798).

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  The Organisation of Employment

  An International Perspective

  • Jill Rubery, Damian Grimshaw(Authors)
  • 2020(Publication Date)
  • Red Globe Press

    (Publisher)

  138 The management and regulation of Labour Markets in the OECD economies during the 1980s and 1990s were strongly influenced by the rhetoric and realities of ‘Labour Market flexibility’. Motivated by a concern to improve job creation, reduce unem-ployment and encourage innovation in new sectors of economic activity, politicians and academics have looked to the apparently deregulated and flexible Labour Market model of the US to transfer policy solutions to the underperforming EU countries. Publication of The OECD Jobs Study in 1994 underlined this view: Against this background, the Labour Market situation has become particularly worrying in Europe, where unemployment has tended to be persistent, ratcheting up in most countries with each recession, and where there is a relatively low rate of employment. This low rate of employment in Europe might perhaps be raised by stronger economic growth, but to what extent this can happen will depend on changes in institutional and other structural factors as well as choices about labour force participation. There is a contrast with the United States where more flexible Labour Markets and other structural factors have allowed the creation of many new jobs . (OECD, 1994b: 60–1, italics added) Before the validity of this view can be assessed, it is first of all necessary to explore what is meant by the term Labour Market flexibility. What is meant by Labour Market flexibility? The flexibility of a Labour Market can be defined as the ability to adapt and respond to change. Box 6.1 identifies a range of indicators usually held to capture the extent of Labour Market flexibility. 1 However, as is often the case in discussions of employ-ment issues, there are two sides to the argument. Flexibility along one dimension may be a source of rigidity and constraint on another. The first indicator — employer freedom to hire and fire — allows for the adjust-ment of employment levels to fit a changing economic environment.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Labour Relations

  • Frank Burchill(Author)
  • 2017(Publication Date)
  • Red Globe Press

    (Publisher)

  If the demand for products grows, other things being equal, employers will demand more of the factors of production. To the extent that capital cannot be substituted or is relatively more expensive, employers will want more labour and THE MARKET FOR LABOUR 15 will offer to pay more for it. Thus, more labour will make itself available and more labour will be employed. If the demand for a particular product grows – for example, computer games – there will be an increase in the demand for those who are capable of programming such games, the pay offered to them will rise and such people will be attracted both from preferring leisure at lower wages and from other occupations. As such when people leave other occupations the pay in those occupations they have left will also rise. As pay levels between occupa-tions are equalised, mobility ceases, having ensured a shift of labour towards the production of computer games. Wages are thus determined by the demand for, and supply of, labour. In this model anyone who wishes to work can approach an employer who uses the type of labour the person can supply and secure work at the current rate or at a rate slightly lower. If the employer has all the workers required at the current rate then an offer to work at a slightly lower rate enables the employer to reduce pay for everybody to that rate and use the savings to employ additional labour. (This result is achieved by the process of offering dismissal to the nearest employee, pointing out that the new one is prepared to work at a lower rate. This employee will probably accept the slight reduction rather than volunteer to leave. If all employees behave in the same way, savings can be made, and labour will become cheaper relative to capital.) It follows that the lower the rate labour is willing to accept, the greater the quantity of labour employed. There will be a rate which would result in everybody being in work.

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Flexibility, Mobility and the Labour Market

  • George S. Callaghan(Author)
  • 2018(Publication Date)
  • Routledge

    (Publisher)

  2 The nature of Labour Markets

  2.1 Introduction

  The whole of the advantages and disadvantages of the different employments of labour and stock must, in the same neighbourhood, be either equal or continually tending to equality. If in the same neighbourhood, there was any employment evidently either more or less advantageous than the rest, so many people would crowd into it in the one case, and so many would desert it in the other, that its advantages would soon return to the level of other employments. (Smith, (1776), 1892: 76, 77)

  What Adam Smith was describing here represents an early articulation of the power of supply and demand to bring the Labour Market into equilibrium. This belief in the market mechanism was build upon by the later neo-classical theorists who saw price as the communicating agent which would bring supply and demand into balance. This chapter sets out to describe and analyse neo-classical Labour Market theory and examine how the work of such theorists combined with the outlook of leading government advisers and politicians to shape the deregulating and pro free market policy agenda of the UK in the 1980s. This is followed by an analysis of the critiques of such theoretical conceptualisations with particular emphasis on the work of segmented Labour Market (SLM) theorists.

  2.2 Free market approach to Labour Markets

  In the field of mainstream economics the prevailing Labour Market theory has been that of neo-classical theorists. This school of thought shared a continuity with classical economics linked to a common utilitarian approach and became strongly associated with marginalist theory (Hicks, 1932, 1963; Stigler, 194i). In the field of Labour Markets the most important development of this school has been related to marginal productivity theory, which, it is argued, controls the demand for labour. Under this theory demand for labour is derived demand, that is labour is not demanded for its own sake but for the contribution it makes to the production of goods and services. The essential assumptions of marginal productivity theory are that firms are price takers both in product and factor markets; factors of production are mobile and firms are profit maximisers. Given these assumptions firms will continue to employ units of its variable factors of production (labour) until the last unit hired adds as just as much to revenue as to cost. Hicks (1932) wrote of this theory:

  Sign up to read

  Learn more about book
• 

  eBook - ePub

  Labour

  A Heterodox Approach

  • Jean Vercherand(Author)
  • 2014(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  2 The Neoclassical Model of the Labour Market Introduction

  According to the basic neoclassical model, the determination of the level of employment and the unit price of labour is dealt with as belonging to a perfectly competitive market, comparable to that of a consumer good. The only difference is that the roles of the agents are reversed. On the one hand, companies are suppliers on the market for goods and demanders on the Labour Market. On the other hand, households1 are demanders on the market for goods and suppliers (of their productive services) on the Labour Market. The wage rate (or equivalently, the unit wage; still more concretely, the hourly wage) and the volume of labour (the number of people employed multiplied by the duration of their work done at a given intensity, or work rates) result in the free confrontation of the global supply of, and demand for, labour. This confrontation is schematised in the form of a Saint Andrew’s cross on a plane where the horizontal axis measures the volume of work in hours while the vertical axis measures the wage rate. Each segment of the cross expresses the relation established between the volume of labour demanded or supplied and the wage rate (see Figure 2.1 ).

  This Saint Andrew’s cross – common to all representations of competitive markets – is the basic scheme of the neoclassical construction. This scheme is based on a large number of hypotheses, one of which is so implicit that it is not even mentioned in microeconomic manuals as being one of the conditions that define pure and perfect competition. The segments of the cross (in reality, curves) express the fact that demanders and suppliers optimise their choices and thus are perfectly free and of independent will .

  Figure 2.1    The basic neoclassical representation of the Labour Market

  In this basic model, labour is considered perfectly homogeneous: all workers have the same productivity. This simplification will be conserved throughout this book, except for a few indicated exceptions.

  Sign up to read

  Learn more about book
• 

  eBook - PDF

  Rediscovering Social Economics

  Beyond the Neoclassical Paradigm

  • Roger D. Johnson(Author)
  • 2017(Publication Date)
  • Palgrave Macmillan

    (Publisher)

  If we were to use this as a macro level tool to describe an aggregate labor market, the implications would remain much the same. Around the area identified by W 1 , we have the traditional Neoclassical labor market which tends to move toward a convergence of wages at a given wage rate: Institutional economists refer to this as the ‘primary market’. These workers are assumed to have sufficient human capital, knowledge and non-wage income so that they can move between different job markets and exit the market if the wage rate is too low. The homogeneity of labor assumption is appropriate to the extent that workers have sufficient train- ing/human capital that they can adapt their skills. Attracting additional workers into the market or away from their exiting employment requires increasing the pay rate. Whether wages converge to a precise equilibrium or are randomly distributed around some point is an important question. Life is even more complex at the bottom end. $ Wage S L W1 W0 W2 VMP Fig. 10.2 Labor market(s) and the inverted ‘S’ labor supply LABOR MARKET EQUILIBRIUM? 135 At the lower end of the backward/inverted ‘S’, we have a negatively sloped supply curve of labor, illustrating the scenario where workers need to find employment because they currently lack employment and/or non-wage sources of income. As a result, their reservation wage approaches ‘0’. Firms that can push wages below W 0 find themselves with a persistent surplus of labor. 2 If we simply accept the need-to-work logic, the central problem is what Keynes and Post-Keynesian scholars have described as a lack of effective demand. The concept of effective demand also has, according to some scholars, direct connections with the relative distribution of income and wealth.

  Sign up to read

  Learn more about book