LABOR AND EMPLOYME

NT

Labor Refers to the exertion

of human effort to acquire an income. Human effort includes physical and mental exertion.

Characteristics Of Labor

1. Labor is perishable. This characteristics makes labor incapable of being stored. Labor that is wasted is lost forever.

2. Labor and the individual are inseparable . A man working for wages cannot separate his physical self from his labor if he wants to enjoy the comforts of another room.

3. Labor supply does not change quickly.

The supply of labor increases steadily as population grows. When there is a great demand for labor in particular year, labor cannot be made to increase abruptly.

4. Most employable persons do not like to move. Even if the demand for labor is higher in some places, many people still prefer to remain unemployed.

Reasons: They want to stay close with

their families. They are not aware of the

demand for their services elsewhere.

They lack the required skill. They cannot afford the cost of

moving from one place to another.

Kinds of Labor

Manual labor

This type of labor mostly involve the exertion of physical effort specifically the use of brawn and muscles.

Clerical labor Is considered as next higher in order than manual labor. Most parts of the clerical work are done with physical effort; exertion is not as great as that in manual labor.

Professional Labor

The professions include the following; physicians, lawyer, engineers, chemists, teachers, nurses and others. Most of the professions require sufficient training and experience.

The labor of management Managers of all kinds and

types perform functions which may be referred to as labor of management. Included under this class are front line managers like supervisors and foremen, middle managers like branch and area manager.

Labor of Entrepreneur

This is one who organizes the business and sees to it that the business becomes stable.

The Labor of Inventors

A very important ingredient of economic development is output of the inventors.

SUPPLY OF LABOR

It is important to know the circumstances that affect their decision to make labor available in the market.

Kinds of supply labor

Market ActivityNonmarket Activity

Effect of the Wages

Rate

The substitution effects

Households will naturally provide some time for nonmarket activities.

Income effect

When the households wage rate is higher, more income will be available to the households for spending. When the households decides to spend its money on leisure or other nonmarket activity, it reduces the time available for pursuing a market activity.

Backward-Bending labor Supply Curve

When the households begin to have sufficient income, labor supply tends to decrease. Stated simply, wage earners reduce the time they spend for work when they receive higher wages.

THE DEMAND FOR LABOR

Labor- is factor of production that is required by business firms.

Business firms- are sources of demand for labor.

Quantity of labor demanded- is the total number of man hours (or man day) hired by all firms in an economy.

The Real Wage Rate

Real wage- refers to the purchasing power of a given nominal (or money) wage.

Nominal wage rate- is the amount in pesos paid to a worker for a unit of work.

Formula:

Real wage rate= __nominal wage Index number of time

overall price level

Example:

The nominal wage rate in the year 2000 was ₱200 per day and ₱210.prices of commodities increased by 5% from 2000 to 2001, the real wage rate remains unchanged if year 2000 was used as based year.

The Labor Demand Curve

A labor is a factor that is brought just like any commodity. Price depends on the quantity demanded.To the business firm buying the factor, price is the real wage rate. When the real wage rate increases, the quantity demanded of labor decreases, and vice versa.

Problems of Labor

A. Unemployment Occurs when a person who is of working age, is willing and able to work but cannot find work. It is an economic problem with undesirable social consequences.

Output and Income LossWhen a willing and able workers do not find employment, they are deprived of income and economy does not benefit from the output they could have produced.

Depreciation Of Human CapitalThe capability to work is referred to as person’s human capital.

Increases in CrimeUnemployed persons who have families to feed or just plainly have nothing else to do sometimes turn to crime as a way of having money or something to do.

Human dignity When persons suffer of loss of employment for long periods , most of them loss their self-esteem as well.

UnderemploymentUnderemployment occurs when a person who works either part-time or full-time but which in both cases receive very little pay.

CAUSE OF UNEMPLOYMENT

Rapid Growth of population

Slow growth of the economy

Technology usedLack of skills

Types of Unemploymen

t

Seasonal unemployment There are some jobs that are seasonal in nature.

Frictional unemploymentThose days that the person is not yet working.

Structural unemploymentHappens when there are available and willing workers but their skills and training are not those required by the business firms.

Cyclical unemploymentWhen the demand for workers is lesser than the supply.

 

B. Inadequate Wages

Causes:InflationLack of skillsToo many dependents

C. Industrial and Labor-Management Conflict

Strikes and lockouts are actions that bring misery to both the employer and the workers.

D. Economic InsecuritiesWorkers worry about having a permanent source of income.

INVESTMENTS IN HUMAN CAPITAL

2 Ways:Education—is provided to the

individual usually before employment.

Training—is done when the person is already working.

Theories of Employment

Classical TheoryEmployment states that employment increases at lower wages. Such theory further claims that widespread unemployment could be caused only by stubborn refusal of workers to accept low enough wages.

Keynesian TheoryStates that the employment is determined by aggregate or total demand for goods and services.