LABOR AND

EMPLOYMENT
Prepared by Group 2
LABOR PROBLEMS
 The labor Problems is the
economics term that widely used
toward the turn of the 20th
Century with various applications.

 It represents conflicts on social

reality with social ideals that
normally rise out of employment.
 UNEMPLOYMENT AND
UNDEREMPLOYMENT
○ An individual suffers economic and social
dislocation if he is unemployed.

○ A person is considered unemployed if he is at

least 15 yrs old ,willingly and able to work
but can not find work.

○ An underemployment is an employed person who

works for more than 40 hrs despite the fact
that he wants to work for more than hours.

○ Underemployment is further subdivided in two

* Visible Underemployment
* Invisible Underemployment
 INADEQUATE WAGES
 Wages and earnings that fail to provide a
minimum of comfortable living can be regarded
as inadequate . Inadequate wages can result
from the inability of wages to catch up with
the increase in prices

 The Department of Labor and employment( DOLE)

defined poverty as the condition where family
receives insufficient income to purchase or
meet the recommended minimum nutrient
requirements and basic needs in clothing,
education, medical care, housing and fuel.
INADEQUATE WAGES
 INDUSTRIAL  refers to disputes between

AND LABOR an employer and a group of

employees, while a conflict
between an employer and a
MANAGEMENT single employee acting alone
is usually referred to as an
CONFLICT "employment" dispute.
 ECONOMIC INSECURITIES

Threats of interruptions in earnings or in

one's work can be regarded as a serious
problem.

A head of the family would be terribly

insecure if he is not certain that his job
would last long enough.
SUBSISTENCE THEORY OF WAGES

During the Industrial Revolution, economists became much

more concerned about wages and the conditions that
influence wage levels.

They recognized that payments for the services of labor was

a major cost of production.

Most prominent of the classical economists were Adam Smith

who published 'The Wealth of Nations' in 1976. Thomas
Malthus wrote 'Essay on Population' in 1789. David Ricardo
has his 'Principles of Political Economy and Taxation' in
1817. John Stuart Mill's 'Principle' s of Political
Economy' in 1848.
 FACTORS AFFECTING
THE THEORY

○ The Laissez-Faire Theory

○ Thomas Malthus
○ David Ricardo
 THE LAISSEZ-FAIRE
THEORY
The political and economic
thinking during this period was
influenced by the laissez-
faire. This doctrine can be
summed up by the slogan “Don’t
interfere, the world will take
care of itself.”
 THOMAS MALTHUS
Thomas Robert Malthus
population theory was an
important and integral part of
the classical liberal economic
and social doctrines.
 DAVID RICARDO
David Ricardo took over and
systematized Malthus’s iron law
of wages. Wages, he concluded,
tended to equal the cost of
reproducing.
 GRAPHICAL ILLUSTRATION

The subsistence theory implies that the demand

and supply of labor are determined by forces
beyond the control of any single individual or
entirety. The 'laissez faire' doctrine states
that the 'market' will determine the
equilibrium price of labor.
 CLASSICAL THEORY

Many of our policy-makers, consciously or unconsciously, are

affected by the classical theory. The theory states that a firm
in a competitive industry will hire workers up to the point
where the value of the marginal product (i.e marginal product
multiplied by the price of output.) just equals the cost of the
factor. Assuming that pure competition prevails, profit
maximization for the economy as a whole, may be written:

w = pMn

where:
w= money wage rate
p= level of prices
Mn= the marginal physical product of labor
 DEMAND FOR LABOR

Demand for labor depends on the demand for the

product it is helping to produce. This means that
the demand for any particular type of labor will
depend on

1. how productive that labor is in helping to create

some product and;
2. the market value of that labor item.

According to the law of diminishing returns, the

marginal product of labor declines as more workers
is hired.
DEMAND FOR LABOR AND TOTAL

In the classical theory,

demand for labor is closely
associated with the output
workers produce.
 SUPPLY FOR LABOR

The supply for labour is the number of hours a worker is

willing and able to work in a given time period.

The supply labor can be expressed in the following supply

function:
Ls = S ( w/p)

Where:
Ls = Supply labor
w/p = real wage rate

if the real wages are low, less workers would be entice to

enter the labor market.
 EQUILIBRIUM POINT

Equilibrium point is
where both employers
and workers agree on
wage rates, is reached
at the interaction of
the demand and supply
of labor.
 KEYNESIAN THEORY
 The classical view was challenged by the advent of
the Great Depression.

 In alternative, John Maynard Keynes proposed a new

theoretical framework, to contend that the
government has a role in stabilizing the economy.
  Keynes argued that high
KEYNES' wages could not be the main
cause of unemployment. He
THEORY ON believed that a wage cut was
theoretically equivalent in
EMPLOYMENT its effect to a fall in the
rate of interest.
 LABOR (1) the forces causing and
maintaining full employment is
MARKETS ARE largely outside labor markets.

NOT SELF (2) the

mechanism has
self-correcting
not proved

CORRECTING effective.
LABOR SUPPLY • The Keynesian attack to the
IS A FUNCTION classical doctrine was launched
in two fronts:

OF MONEY * problems in aggregate supply

* problems in aggregate demand

WAGES
THANK YOU
AND
GOD BLESS!