Labor and

Employment
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 Labor…
- is a measure of the work done by human beings.
- one of three factors of production.
- there are macro-economic system theories which have
created a concept called human capital, although there are
also counter posing macro-economic system theories that
think human capital is a contradiction in terms
- Human skills creating goods and services

- Wage is a basic compensation for labour, and the

compensation for labour per period of time is referred
to as the wage rate
Factors of Production:
1. Land 1. Capital

1. Labor

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Human Capital
- is the economic value that is derived from the
actual application of knowledge, collaboration, and
process-engagement

- It is also viewed as a way of defining and

categorizing peoples' skills and abilities as used in
employment and otherwise contribute to the
economy

- referring to the skills that workers possess, not

necessarily their actual work

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Employment
- is a contract between two parties, one being the
employer and the other being the employee
- Ina commercial setting, the employer conceives of
a productive activity, generally with the intention of
creating profits, and the employee contributes labor
to the enterprise, usually in return for payment of
wages.

- To the extent that employment or the economic

equivalent is not universal, unemployment exists.
Employer

- An employer is a person or institution that hires

employees or workers. Employers offer wages to the
workers in exchange for the worker's labor-power.

- Employers include everything from individuals

hiring a babysitter to governments and businesses
which hire many thousands of employees. In most
western societies governments are the largest single
employers, but most of the work force is employed
in small and medium businesses in the private
sector.
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Employee
- An employee contributes labor and expertise to an
endeavor. Employees perform the discrete activity
of economic production. Of the three factors of
production, employees usually provide the labor.
- Specifically, an employee is any person hired by an
employer to do a specific "job". In most modern
economies the term employee refers to a specific
defined relationship between an individual and a
corporation, which differs from those of customer, or
client. Most individuals attain the status of employee
after a thorough process of interviews with several
departments within a company.
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Unemployment
- a person who is able and willing to work at a
prevailing wage rate yet is unable to find a paying
job is considered to be unemployed
- The unemployment rate is the number of
unemployed workers divided by the total civilian
labor force, which includes both the unemployed
and those with jobs (all those willing and able to
work for pay).
- Some of the likely costs of unemployment for society
include increased poverty, crime, political instability,
mental health problems, and diminished issue in
economics. A low rate of unemployment is a good
thing that usually prevents mass poverty and violence.
Unemployment
- Benefits for the entire economy arising from unemployment
include that it keeps inflation from being high, following the
Phillips curve, or from accelerating, following the
NAIRU/natural rate of unemployment theory.

- There is considerable debate amongst economists as to what

the main causes of unemployment are. Keynesian economics
emphasizes unemployment resulting from insufficient
effective demand for goods and service in the economy.
Others point to structural problems inherent in labor
markets. Classical or neoclassical economics tends to reject
these explanations, and focuses more on rigidities imposed on
the labor market from the outside, such as minimum wage
laws, taxes, and other regulations that may discourage the
hiring of workers.
 Unemployment

- Yetothers see unemployment as largely due to

voluntary choices by the unemployed. On the
other extreme, Marxists see unemployment as a
structural fact helping to preserve business
profitability and capitalism. The different
perspectives may be right in different ways,
contributing to our understanding of different
types of unemployment.

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Phillips Curve

- In macroeconomics, the Phillips

curve (PC) is a supposed inverse
relationship between inflation and
unemployment.

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NAIRU
- The term NAIRU is an acronym for Non-Accelerating
Inflation Rate of Unemployment. It is a concept in economic
theory significant in the interplay of macroeconomics and
microeconomics.

- If actual unemployment falls below the NAIRU, the inflation

rate is likely to rise quickly (accelerate).

- The concept arose in the wake of the popularity of the

Phillips curve which summarized the observed negative
correlation between the rate of unemployment and the rate of
inflation (measured as annual nominal wage growth of
employees) for a number of industrialised countries with
more or less mixed economies.
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Underemployment
- In economics, the term underemployment has
at least three different meanings. All three of them
involve underutilization of labor that is missed by
official definitions and measurements of
"unemployment."

1. Underutilization of Skills
2. Underuse of Economic Capacity
3. Underuse of Employed Workers
Underutilization of Skills

-In one usage, it describes the employment

of workers with high skill levels in low-
wage jobs that do not require such
abilities. For example, someone with a
college degree may be tending bar or
driving a cab. Alternatively, a skilled
machinist may be working at a fast-food
outlet.
- This may result from the existence of
unemployment, which makes workers with bills to
pay (and responsibilities) take almost any jobs
available, even if they do not use their talents. This
can also occur with individuals who are being
discriminated against, lack appropriate trade
certification or academic degrees (such as a high
school or college diploma), or have served time in
jail. Some types of skills -- such as those
associated with doctorates in literature or
philosophy -- are valued very poorly by the
marketplace, so that people often end up taking
jobs that do not employ their education.
Underuse of Economic Capacity
-The term can also be applied by regional planners
to describe localities where economic activity
rates are unusually low. This can be induced by
a lack of job opportunities, training opportunities,
or services such as childcare and public
transportation.
-Such difficulties may lead residents to accept
economic inactivity rather than register as
unemployed or actively seek jobs because their
prospects for regular employment appear so bleak.

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Underuse of Employed Workers

- The third definition of "underemployment" describes

a polar opposite phenomenon: to some economists,
the term refers to "overstaffing" or "hidden
unemployment," the practice of businesses or
entire economies employing workers who are not fully
occupied i.e. who are currently not being used to
produce goods or services. This may be because of
legal or social restrictions on firing and lay-offs or
because they are overhead workers, or because the
work is highly seasonal.
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