© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-1 Chapter One Introduction to Labour Market Economics Created by: Erica Morrill, M.Ed Fanshawe College

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-2 Chapter Focus  Main actors and roles  Labour supply and demand  Policy Questions  Characteristics of market  Neoclassical and alternative approaches

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-3 Labour Market Participants  Individuals  Firms  Government

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-4 Decisions by Individuals  When to enter the labour force  How much education/training  Type/extent of job search  Occupation/Industry  Labour hours/household work  Accept/quit/ relocation  Wage rate  Union/association

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-5 Labour Market Behaviour Positive Aspects  Obtaining a job  Promotion  Increase in wage rate  Benefits Negative Aspects  Unemployment  Job displacement  Discrimination  Poverty

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-6 Decisions by Employers  # of workers  Wages/benefits  Hours  Layoff /bankruptcy  Subcontract  Pension/retirement policy Global Competition Legislative Environment Changing Workforce

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-7 Global Competition Influences  Free trade  Industrial restructuring  Deregulation  Privatization

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-8 Changing Workforce  Age  Gender  Ethnic diversity

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-9 Legislative Environment  Human Rights  Minimum wage  Overtime  Maternity leave  Worker’s compensation  Occupational health/safety  Pensions/mandatory retirement  Labour laws/collective bargaining

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-10  individual rights vs. employer competitiveness  public support  Training  Insurance  Compensation  Pensions  Vocational rehabilitation Decisions by Government

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-11 Labour Market Economics Involves analyzing the determinants of the various dimensions of labour supply and demand and their interaction in alternative market structures to determine wages, employment and unemployment.

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-12 Dimensions of Labour Supply Quantity Dimensions  Population growth  Labour force participation  Work hours  part-time  overtime  flex-time

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-13 Dimensions of Labour Supply Quality Dimensions  Human capital investments  education, training, health  mobility  Work effort/intensity

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-14 Dimensions of Labour Supply  Incentive effects of income maintenance and tax-transfer schemes  wage subsidies  income taxes  insurance  welfare  disability  pension plans

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-15 Dimensions of Labour Demand The firm’s demand for labour are based on:  labour costs  firms output

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-16 Supply and Demand The interaction between supply and demand determines  wages  employment  unemployment

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-17 Table 1.1 Sources of Income for Individual Canadians, 1994

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-18 Figure 1.1 The Distribution of Individual Labour Earnings, 1994

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-19 Figure 1.2 The Distribution of Individual Annual Hours Worked, 1994

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-20 The Supply and Demand Model  Key assumptions in the neoclassical model:  behavioural assumptions  how buyers and sellers respond to prices and other factors  interaction of buyers and sellers and level and terms of market exchange

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-21 Figure 1.4 Wages and Employment in a Competitive Labour Market NSNS Employment Wages NDND W* N*N* W’ N D’ N S’ Supply >Demand

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-22 Current Policy Issues  Concerns for both public and private policymakers  Supply  Demand  Wage determination and wage structure  Unemployment

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-23 Similarities/Differences Between Labour Market and Other Markets  Various actors/goals  three with different objectives or agendas  Sociological, institutional and legislative constraints  Market imperfections  imperfect/asymmetric information  costs  uncertainty and risk  Complex price serving a variety of functions  wage reflects a variety of factors

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-24 Alternative Perspectives  Neoclassical  Institutionalism  Dualism  Radicalism

© 2002 McGraw-Hill Ryerson Ltd.Chapter 1-25 End of Chapter One