INTRODUCTION TO LABOUR ECONOMICS &PERSONNEL ECONOMICS
They also generate incentives for labor mobility and migration. Macroeconomics stresses theaggregative aspects of labor markets and , in particular, labor productivity, labor share of national income, the overall level of employment, and the impact of wage upon the pricelevel. The above diagram
shows the relationship among various contents of laboreconomics.
Distinction of labor and scope of labor economics
Labor possess some distinguishable characteristics than those of other goods or services.Labor services are rented, not sold
Suppliers of labor care about the way in which the labor is used
Labor productivity is affected by pay and working conditions
labor supply is affected by Non-monetary aspects (i.e., leisure time)
Distinction of Labor from other Goods and Services-Aspect of Labor Explanations & ExamplesConsequences
1. Labor is a
, not afinal product.Unlike most goods whichhouseholds buy, labor is one of thefew goods they sell.-income effects work in different waysfor labor than other goods; “perverse” responses like “backward-bending” labor supply are more likely-the demand for labor is a deriveddemand, from the demand firms facefor their products2. Like capital,labor is a
flow of services
stock of “equipment”.
The “stock” in this case is theworker and the skills he/shepossesses. The “flow” is the rightto use it for a period of time.-the stock must be produced andmaintained: education, training areneeded.-in most cases, delivery of the “flow” requires physical presence: quality of the work environment matters3. Unlike capital, the “stock” cannot bebought and sold.-Slavery is prohibited-For various reasons, people can’tsell “shares” inthemselves, for example tofinance education-borrowing constraints may matter forhuman capital investment (education)-human capital investment is riskierthan physical capital investmentbecause it is
4. Labor is a very
commodity-Workers are differentiated by typeof skill, amount of skill,demographic characteristics.-a wide variety of prices and marketconditions for different labor servicescan coexist. This gives rise to a
distribution of earnings.
5. The quality of laborservices beingsupplied is often
.-workers may simply “shirk” -poor management decisions maynot be apparent for years-compensation and incentive systemsneed to be designed appropriately6. Sometimes thedemanders
/orsuppliers of laborhave considerable
-employers’ associations,company towns, other
-unions-search costs, relationship-specificskills and bilateral monopoly.-use monopoly/monopsony and searchtheory to study these markets