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The labor market. Labor Supply Workers Labor Demand Firms Market Clearing? Full employment. Non-Commodity Forced -> Slave Free Household Militant Wage earner Civil servant House helpers. Commodity Prisoners Free Self employed informal sector Peasants Wage earner
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The labor market • Labor Supply • Workers • Labor Demand • Firms • Market Clearing? • Full employment
Non-Commodity Forced -> Slave Free Household Militant Wage earner Civil servant House helpers Commodity Prisoners Free Self employed informal sector Peasants Wage earner private firms Characteristics or modes of mobilization of labor force
Labor Supply People in the labor force • Economically Active Population “EAP” • civilian population with or without a job that have been looking for one in a period of time before the survey (BLS last 4 weeks)
People not in the labor force • Participating as students in the education system • Unpaid household work • Retired or with pensions • For health reasons • Volunteer in community services
Research questions on the labor supply • Who is in the labor market? • Who is out of the labor market? • Age • Gender • Position in the household • Location
Why the participation rate changes overtime? • Cultural factors • women in the labor market • scholarships and school retention • more years of study • Discouraged workers effect • Additional worker effect
Civilian population between 16 and up and employed population
Research questions on the labor demand • Who has a job? • Gender • Age • Qualifications • Salary/Wage • Hours of work • Relation with the owner of the firm
What means to be employed • Wage earners • a person that at the time of the survey/census was working with a salary in cash or in kind • with a job but not working at the time of the survey due to various factors • members of the army (where not professionals)
What means to be employed • Independent workers • Professionals • Self Employed • Employers • Workers without pay devoting a number of hours to earn money or goods or services
Some problems with the estimation of the employment • Underestimates the production for self consumption, especially at rural level • The legal age hides child labor • Informal workers above the age of retirement • Seasonal workers not captured by the survey
Research questions on the Labor Demand • Who is unemployed? • Age • Gender • Ethnicity • Duration of unemployment • Turn over
Research questions on the Labor Supply • What means to be under employed? • Does she/he wants to work more hours? • Social/Demographic considerations
What is to be under employed • Open under employment (visible) people working for a salary o independently involuntary working less than the normal (legal) working hours and willing to do it in the same job or getting an additional one. • Hidden under employment • Low hourly payment according to qualifications • Voluntary under employment
Research questions on the labor supply • Who is over employed? • Hours of work • Social/demographic characteristics
Changes in labor participation • It is difficult to define a single labor supply function • For adult males participation is a function of the demographic growth • For adult females it is a function of the income of the household (expresed on the income of the HHH, plus a trend that reflects cultural factors • Additonal workers are function of what happen with the other two.
Labor supply functions • Male participation • f(pop.growth) • Female participation • f(wages, prime worker unemp, pw Y) • Youth participation • f(pw unemp, pw Y, Female emp.)
Some findings • Male participation have been declining over time in relative terms • Female participation, excluded the growing trend, tend to be counter cyclical if employment represents the cycle. • Youth have a similar behaviour to females
Some findings • In the US, female participation can have an U shaped behavior, since wage increases may induce it. • With youngsters the trend is less clear
How may an ELR program affect labor supply • Depends on the ELR benefit • If it is high enough to support a family there should be no changes, unless the discouraged effect was high before the ELR • If it is not enough the effect can be a sudden increase in the rate of participation of additional workers
Other effects of ELR on labor supply • If schooling is a complementary part of ELR (scholarships for youngsters) the rate of participation could decrease. • If childcare is considered and ELR activity, rate of participation may decrease
The Labor Demand • Depends mainly on the level of economic activity (GDP growth) and labor costs relative to the price of capital goods • emp = f( GDP, w/k) • The employment to GDP elasticity varies according to the business cycle
Labor Demand • Studies all over the world have found that price elasticity of labor is very low, ranging from 0.15 to 0.45 in most of the cases
The need to work with different labor markets • In countries with clear formal and informal sectors, the demand for labor should be taken into account in a different way. • Informal markets are more wage sensitive than the rest. • Informal markets are a way to escape “stickiness” of unionized wages