Essay On Labour Market

Labour Market

So far, we used supply and demand to examine the way in which prices are determined when firms sell their output to consumers in the market for goods and services. In producing, firms must buy the services of land, labour, and capital, the factors of production, in order to make the goods and services to sell to consumers. Supply and demand may also be used to examine how the prices of these factors of production are determined.

In this report we will examine how the price of one particular factor of production is determined. This price is wages or the price of labour. From the table below it can be seen that incomes from

Employment and self-employment account for 73% of all income received in the UK.

Factor shares in domestic income 1997

£billion %share

Income from employment 400.4 62.1

Income from self-employment 69.9 10.8

Gross trading surplus of companies 101.4 15.7

Gross trading surplus of public corporations 4.6 0.7

Rent 68.1 10.6

Total Domestic income 644.4 100

The market for labour in an economy will consist of all those people willing and able to supply themselves for work and all those people and firms willing and able to employ them. That is, a Labour Market exists when there is a supply of labour and demand for labour.

There can be many different markets for labour in an economy. Labour markets can be local, national, or even international if people are willing and able to travel overseas to find work. Labour Markets will also exist for every different occupation or type of skill. For example, the market for economists, computer programmers, bricklayers, mechanical engineers or hairstylists.

Within each labour market the wage paid to workers will be determined by the forces of labour demand and supply...

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...comparability refers to a situation where workers, perhaps in different industries, doing broadly similar jobs, having similar qualifications and possessing the same degree of responsibility receive comparable (i.e., roughly the same) wages. The difficult here is that some jobs are difficult to compare with other jobs. For example, how can you compare a teachers job or a nurse with other groups of workers?

Wage relativity is a similar idea. This is when a certain groups of workers have always received a wage which is relatively the same or perhaps a proportion more or less than another group of workers. Groups of workers are very concerned to maintain their relativities or differentials as they are often called. If a worker’s differentials are being eroded, this is only painful in the sense that the wage relativity compared to other groups of workers has diminished.