Lecture Labour market economics: Chapter 1 - Dwayne Benjamin, Morley Gunderson, Craig Riddell

Chapter 1 - Introduction to labour market economics. After studying this chapter you will be able to understand: Main actors and roles, labour supply and demand, policy questions, characteristics of market, neoclassical and alternative approaches.

Chapter One Introduction to Labour Market Economics  Created by: Erica Morrill, M.Ed           Fanshawe College © 2002 McGraw­Hill Ryerson Ltd Chapter 1­1 Chapter Focus  Main actors and roles  Labour supply and demand  Policy Questions  Characteristics of market  Neoclassical and alternative approaches © 2002 McGraw­Hill Ryerson Ltd Chapter 1­2 Labour Market Participants  Individuals  Firms  Government © 2002 McGraw­Hill Ryerson Ltd Chapter 1­3 Decisions by Individuals When to enter the labour force  How much education/training  Type/extent of job search  Occupation/Industry  Labour hours/household work  Accept/quit/ relocation  Wage rate  Union/association  © 2002 McGraw­Hill Ryerson Ltd Chapter 1­4 Labour Market Behaviour Positive Aspects Negative Aspects Obtaining a job  Promotion  Increase in wage rate  Benefits   Unemployment  Job displacement  Discrimination  Poverty © 2002 McGraw­Hill Ryerson Ltd Chapter 1­5 Decisions by Employers # of workers Global   Wages/benefits Competition  Hours  Layoff /bankruptcy Legislative   Subcontract Environment  Pension/retirement policy Changing  Workforce © 2002 McGraw­Hill Ryerson Ltd Chapter 1­6 Global Competition Influences  Free trade  Industrial restructuring  Deregulation  Privatization © 2002 McGraw­Hill Ryerson Ltd Chapter 1­7 Changing Workforce  Age  Gender  Ethnic diversity © 2002 McGraw­Hill Ryerson Ltd Chapter 1­8 Legislative Environment Human Rights  Minimum wage  Overtime  Maternity leave  Worker’s compensation  Occupational health/safety  Pensions/mandatory retirement  Labour laws/collective bargaining  © 2002 McGraw­Hill Ryerson Ltd Chapter 1­9 Decisions by Government individual rights vs employer competitiveness  public support       Training Insurance Compensation Pensions Vocational rehabilitation © 2002 McGraw­Hill Ryerson Ltd Chapter 1­10 Labour Market Economics Involves analyzing the determinants of the various dimensions of labour supply and demand and their interaction in alternative market structures to determine wages, employment and unemployment © 2002 McGraw­Hill Ryerson Ltd Chapter 1­11 Dimensions of Labour Supply Quantity Dimensions  Population growth  Labour force participation  Work hours  part-time  overtime  flex-time © 2002 McGraw­Hill Ryerson Ltd Chapter 1­12 Dimensions of Labour Supply Quality Dimensions  Human capital investments  education, training, health  mobility  Work effort/intensity © 2002 McGraw­Hill Ryerson Ltd Chapter 1­13 Dimensions of Labour Supply  Incentive effects of income maintenance and tax-transfer schemes  wage subsidies  income taxes  insurance  welfare  disability  pension plans © 2002 McGraw­Hill Ryerson Ltd Chapter 1­14 Dimensions of Labour Demand The firm’s demand for labour are based on:  labour costs  firms output © 2002 McGraw­Hill Ryerson Ltd Chapter 1­15 Supply and Demand The interaction between supply and demand determines  wages  employment  unemployment © 2002 McGraw­Hill Ryerson Ltd Chapter 1­16 Table 1.1 Sources of Income for Individual Canadians, 1994 © 2002 McGraw­Hill Ryerson Ltd Chapter 1­17 Figure 1.1 The Distribution of Individual Labour Earnings, 1994 © 2002 McGraw­Hill Ryerson Ltd Chapter 1­18 Figure 1.2 The Distribution of Individual Annual Hours Worked, 1994 © 2002 McGraw­Hill Ryerson Ltd Chapter 1­19 The Supply and Demand Model  Key assumptions in the neoclassical model:  behavioural  assumptions how buyers and sellers respond to prices and other factors  interaction of buyers and sellers and level and terms of market exchange © 2002 McGraw­Hill Ryerson Ltd Chapter 1­20 Figure 1.4 Wages and Employment in a Competitive Labour Market Supply >Demand Wages NS W’ W* ND ND’ N* NS’ Employment © 2002 McGraw­Hill Ryerson Ltd Chapter 1­21 Current Policy Issues  Concerns for both public and private policymakers  Supply  Demand  Wage determination and wage structure  Unemployment © 2002 McGraw­Hill Ryerson Ltd Chapter 1­22 Similarities/Differences Between Labour Market and Other Markets  Various actors/goals  three with different objectives or agendas Sociological, institutional and legislative constraints  Market imperfections      imperfect/asymmetric information costs uncertainty and risk Complex price serving a variety of functions  wage reflects a variety of factors © 2002 McGraw­Hill Ryerson Ltd Chapter 1­23 Alternative Perspectives  Neoclassical  Institutionalism  Dualism  Radicalism © 2002 McGraw­Hill Ryerson Ltd Chapter 1­24 End of Chapter One © 2002 McGraw­Hill Ryerson Ltd Chapter 1­25 ... © 2002 McGraw­Hill Ryerson Ltd Chapter 1 16 Table 1. 1 Sources of Income for Individual Canadians, 19 94 © 2002 McGraw­Hill Ryerson Ltd Chapter 1 17 Figure 1. 1 The Distribution of Individual Labour Earnings, 19 94 © 2002 McGraw­Hill Ryerson Ltd... © 2002 McGraw­Hill Ryerson Ltd Chapter 1 14 Dimensions of Labour Demand The firm’s demand for labour are based on:  labour costs  firms output © 2002 McGraw­Hill Ryerson Ltd Chapter 1 15 Supply and Demand... © 2002 McGraw­Hill Ryerson Ltd Chapter 1 11 Dimensions of Labour Supply Quantity Dimensions  Population growth  Labour force participation  Work hours  part-time  overtime  flex-time © 2002 McGraw­Hill Ryerson Ltd Chapter 1 12