Labor Market
longer in the labor force.
The labor market, also known as the job
market, refers to the supply and demand for
labor in which employees provide the supply
and employers the demand. It is a major
component of any economy and is intricately
tied in with markets for capital, goods and
services.
At the macroeconomic level, supply and
demand are influenced by domestic and
international market dynamics, as well as
factors such as immigration, the age of the
population and education levels. Relevant
measures include unemployment, productivity,
participation rates, total income and gross
domestic product (GDP).
At the microeconomic level, individual firms
interact with employees, hiring them, firing
them and raising or cutting wages and hours.
The relationship between supply and demand
influences the hours the employee works and
compensation she receives in wages, salary and
benefits.
Labor force- is the number of people who are
employed plus the unemployed who are looking
for work. The labor pool does not include the
jobless who aren't looking for work.
For example, stay-at-home moms, retirees, and
students are not part of the labor force.
Discouraged workers who would like a job but
have given up looking are not in the labor force
either. To be considered part of the labor force,
you must be available, willing to work, and have
looked for a job recently. The official
unemployment rate measures the jobless who
are still in the labor force.
The size of the labor force depends not only on
the number of adults but also how likely they
feel they can get a job. So, the labor pool
shrinks during and after a recession. That's true
even though the number of people who would
like a full-time job if they could get it may stay
the same. The real unemployment rate
measures all the jobless, even if they're no
The labor force participation rate refers to the
number of people available for work as a
percentage of the total population. In January
2019, it was 63.2 percent.
It measures the amount of labor in an economy,
one of the factors of production. The other
three are natural resources, capital, and
entrepreneurship.
LFPR Formula
Here's how to calculate the labor force
participation rate:
LFPR = Labor Force / Civilian Non-
Institutionalized Population
where the Labor Force = Employed +
Unemployed
Labor Supply Curve
A labor supply curve shows the number of
workers who are willing and able to work in an
occupation at different wages. You can easily
demonstrate that the labor supply curve has a
positive slope by deriving
Labor Market Equilibrium
The balanced situation where the supply of
potential employees is equal to the demand.
When labor market equilibrium occurs, neither
a labor excess nor a labor deficit is observed in
the job market, and pay scales tend to remain
constant as a result.
Read more:
http://www.businessdictionary.com/definition/
labor-market-equilibrium.html
WHAT CAUSES THE LABOR DEMAND CURVE TO
SHIFT?
We now understand the labor-demand curve: It
reflects the value of the marginal product of
labor. With this insight in mind, let’s consider a
few of the things that might cause the labor-
demand curve to shift.
The Output Price The value of the marginal
product is marginal product times the price of
the firm’s output. Thus, when the output price
changes, the value of the marginal product
changes, a the labor demand curve shifts. An
increase in the price of apples, for instance,
raises the value of the marginal product of each
worker who picks apples and, therefore,
increases labor demand from the firm; that
supply apples. Conversely, a decrease in the
price of apples reduces the value of the
marginal product and decreases labor demand.
Technological Change Between 1960 and 2000,
the amount of output a typical U.S. worker
produced in an hour rose by 140 percent. Why?
The most important reason is technological
progress: Scientists ~ engineers are constantly
figuring out new and better ways of doing
things. This has profound implications for the
labor market. Technological advance typically
raises the marginal product of labor, which in
turn. increases the demand for labor and shifts
the labor-demand curve to the right.
It is also possible for technological change to
reduce labor demand. The invention of a cheap
robot, for instance, could conceivably reduce
the marginal product of labor, shifting the
labor-demand curve to the left. Economists call
this labor-saving technological change. History
suggests, however, that most technological
progress is instead labor-augmenting. Such
technologist advance explains persisted rising
employment In the face of rising wages: Even
though wages (adjusted for inflation) increased
by 131 percent during the last four decades of
the 20th century, firms nonetheless increased
by 80 percent the . amount of labor they
employed.
The Supply of Other Factors The quantity
available of one factor of production can affect
the marginal product of other factors. A fall in
the supply of ladders, for instance, will reduce
the marginal product of apple pickers and thus
the demand for apple pickers. We consider. this
linkage among the factors of production more
fully later in the chapter.
Factor Affecting Labor Market:
1. The number of qualified people
For example, the number of qualified
accountants is low, therefore supply is quite
inelastic. For a job such as fast food operator,
the number of potentially qualified people is a
high percentage of the labour force, therefore
supply is much more elastic
2. Difficulty of getting qualifications
If it is difficult to get particular qualifications,
supply will be inelastic. For example, even if
wages of economics teachers rose, the supply
would be quite inelastic – to become qualified
would take several years.
3. The non-wage benefits of a job
Unpleasant jobs will have fewer people willing
to do them therefore supply will be relatively
lower. Although many unpleasant jobs, such as
cleaning are relatively low-skilled so may still be
low paid.
4. The wages and conditions of other jobs
If many jobs in a local area are considered
unpleasant – e.g. fruit pickers, then the supply
of alternatives will be relatively higher.
5. Demographic changes and immigration
Some jobs, such as fruit picking are unpopular
with native-born workers and rely on immigrant
labour. If immigration slows down, there can be
vacancies in these particular jobs. Post-Brexit
vote, farmers reported difficulty in filling labour
vacancies due to a slowdown in immigration.
Money- any circulating medium of exchange,
including coins, paper money, and demand
deposits.paper money.gold, silver, or other
metal in pieces of convenient form stamped by
public authority and issued as a medium of
exchange and measure of value.any article or
substance used as a medium of exchange,
measure of wealth, or means of payment, as
checks on demand deposit or cowrie.
BARTERING
A 640 BC one-third stater electrum coin from
Lydia Dawn of civilization: Obsidian, a glass-like
volcanic rock, was one of the earliest forms of
money.It was valuable because it could be
fashioned into highly quality, versatile tools.
9000 BC: Humans began to grow crops and
cattle. This, gave birth to “bartering”, where
livestock and grain were exchanged for other
items which were deemed essential or useful at
the time.
2279 BC: The Ancient Babylonians defined the
first guidelines for “money” and established a
form of measurement called the “shekel”. It
was based on a specified amount of weight for
different items and was applied across a variety
of goods ranging from barley to gold.
COWRY SHELLS TO METAL COINS
1300 BC: Cowry sea shells were used as money
in areas as diverse as Africa, South Asia,
Australia and Oceania. They were made up of
either whole shells or were artificially shaped in
pieces that were then worn as ornaments.
1100 BC: Early Chinese civilizations are credited
for the first use of standardized currency in the
shape of miniature, bronze casts of replica
knives and spades. These casts eventually
evolved into round shaped coins, with holes in
the middle that allowed them to be strung
together.
687 BC: Other civilizations started developing
their own unique coins. The first official
currency ever, was minted out of gold and
featured a roaring lion’s head. It was issued by
King Alyattes of Lydia, now part of modern day
Turkey.
300 BC: The Roman Empire established its own
currency, known as Denarius. These coins were
mostly minted out of silver and depicted
important symbolic images about the Roman
Republic.
PAPER MONEY
Chinese currency on deer skin
118 BC: The Chinese issued the first ever leather
banknote. It was made out of a rare white
deerskin and its edges were painted with bright
colours. These leather banknotes were
exchanged for goods and were key in the
establishment of a nascent commercial system.
700- 1100 AD: Paper notes initially appeared in
the 7th Century, during the Tang Dynasty but
their widespread use only became prevalent
much later. Their emergence is attributed to a
copper shortage as well as the drawbacks
presented by the heavy weights of coins in large
commercial transactions.
1290 AD: European explorer,Marco Polo,was
amazed by Chinese paper currency and
discussed it extensively in his book, “The Travels
of Marco Polo”. Some historians credit him for
introducing the idea of paper money to
Europeans.
1661 AD: The first European banknotes were
printed in Sweden by Stockholms Banco. They
were redeemable against their stated amount
of silver coins, held by the bank. Initially, all
went well, but the bank soon started issuing
more notes than it could afford to honour and
in 1668, the bank collapsed.
THE GOLD STANDARD
U.S. gold coins
1800 AD: The gold standard was an innovative
concept that combined the best aspects of
paper money with those of coins. It allowed
central banks to create money whilst at the
same time having that money backed by
precious metals.
1844 AD: In England, the “Bank Charter Act”
decreed that the Bank of England notes were
fully backed by gold. According to the strict
interpretation of the gold standard, this act
marked the establishment of a full gold
standard for British currency.
CREDIT CARDS
American Express card from 1959
1946 AD: The first bank card, named was
introduced in 1946 by John Biggins, a banker in
Brooklyn. When a customer used it for a
purchase, the bill was forwarded to Biggins’
bank. The bank reimbursed the merchant and
then obtained payment from the customer.
1950 AD: The Diners Club released its first card
and was used in more than 20 restaurants in
New-York to pay for bills without the need for
cash.
1970 AD: The magnetic strip was perfected and
allowed for personal and financial information
to be reliably decoded by a machine. This
breakthrough brought credit cards into the
information age.
ELECTRONIC MONEY
1990 AD: Chip technology was introduced. This
allowed for large amounts of information to be
stored and for verification processes to occur at
the points of sales. Mastercard also developed a
system to allow for chip cards to be operated
globally..
Philippine peso - the basic unit of money in the
Philippines; equal to 100 centavospeso
centavo - a fractional monetary unit of several
countries: El Salvador and Sao Tome and
Principe and Brazil and Argentina and Bolivia
and Colombia and Cuba and the Dominican
Republic and Ecuador and El Salvador and
Guatemala and Honduras and Mexico and
Nicaragua and Peru and the Philippines and
Portugal
Philippine monetary unit - monetary unit in the
Philippines
What is Foreign Exchange
Foreign exchange is the exchange of one
currency for another or the conversion of one
currency into another currency. Foreign
exchange also refers to the global market where
currencies are traded virtually around the clock.
Foreign exchange transactions encompass
everything from the conversion of currencies by
a traveler at an airport kiosk to billion-dollar
payments made by corporations, financial
institutions and governments. Transactions
range from imports and exports to speculative
positions with no underlying goods or services.
Increasing globalization has led to a massive
increase in the number of foreign exchange
transactions in recent decades.
The global foreign exchange market is the
largest and the most liquid financial market in
the world, with average daily volumes in the
trillions of dollars. Foreign exchange
transactions can be done for spot or forward
delivery. There is no centralized market for
forex transactions, which are executed over the
counter and around the clock.
The largest foreign exchange markets are
located in major financial centers like London,
New York, Singapore, Tokyo, Frankfurt, Hong
Kong and Sydney. The term foreign exchange is
usually abbreviated as "forex" and occasionally
as "FX."
The foreign exchange market is unique for
several reasons, mainly because of its size.
Trading volume in the forex market is generally
very huge. As an example, trading in foreign
exchange markets averaged $5.1 trillion per day
in April 2016, according to the Bank for
International Settlements, which is owned by 60
central banks, and is used to work in monetary
and financial responsibility.
There is no internationally accepted statistical
definition of labour migration. However, the
main actors in labour migration are migrant
workers, which the International Labour
Organization (ILO) defines as:

“… all international migrants who are currently

employed or unemployed and seeking
employment in their present country of
residence.” (ILO, 2015).

The United Nations Statistics Division (UN SD)

also provides a statistical definition of a foreign
migrant worker:

“Foreigners admitted by the receiving State for

the specific purpose of exercising an economic
activity remunerated from within the receiving
country. Their length of stay is usually restricted
as is the type of employment they can hold.
Their dependents, if admitted, are also included
in this category.” (UN SD, 2017).

While migrant workers are often also

international migrants, not all are (see table
below). It is important to note the difference
between the definition of a foreign migrant
worker and an international migrant. An
international migrant is defined as:

“any person who changes his or her country of

usual residence” (UN DESA, 1998).

Data on international migrant stocks are mostly

based on country of birth (if different from
country of residence). Where no information on
foreign-born is available in censuses, data on
international migrant stocks are based on
country of citizenship (UN DESA, 2016:4, UN SD,
2017). When defining migrant workers,
emphasis is placed on a person’s citizenship
rather than their country of birth (ILO, 2015).