The Labor Market

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Labor economics seeks to understand the functioning and dynamics of the markets for labour. Labor markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labor services (workers), the demands of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income.
There are three main groups of actors or participants in the labour market: individuals, firms (or employers), and the government. Individuals make labour market decisions concerning whether and when to enter the labour force, how much education, training and job search to undertake, what type of work (which occupation and industry), how many hours to work each week (and weeks per
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In the long run, however, it typically becomes easier to replace labour with capital: – in other words, to introduce labour – saving technology so that the demand for labour is likely to be more elastic.
The supply of labour, like the supply for other services, merely indicates how much labour workers are willing to offer at various prices. A worker 's supply of labour depends on his or her preferences for two types of “goods”: consumption goods and leisure. Consumption goods include all the goods that can be purchased with the income that a worker earns from working. Leisure is the good that workers consume when they are not working. By working more (supplying more labour), a worker reduces his or her consumption of leisure but is able to increase his or her purchases of consumption goods. In choosing between leisure and consumption, the worker may face constraints. These constraints can be seen as factors that may affect their supply of labour. The factors that affect the supply of labour are wage rates, population size, social factors, education requirements and working age. In most cases the supply of labour will increase with the increase in wages. This is because more workers will be attracted by a higher wage rate and moreover the existing workforce may be willing to work overtime at a higher wage rate. The population size affects supply since an increase in population will lead to an increase in the

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