Labour and the Labour Market
Labour is the human element in the production process. The labour market is a factor market where the demand and supply of labour interact to determine the wage rate and the allocation of labour resources in the economy.
Derived Demand for Labour
The demand for labour is derived from the demand for the goods and services that labour is used to produce. In a competitive labour market, the interaction of the demand and supply for labour will determine wage rates and the allocation of labour resources. However, governments intervene in the free operation of labour markets for a number of reasons
- Establish minimum wage levels
- Resolve industrial disputes
- Set minimum conditions (health and safety)
- Annual leave and superannuation payments
Size and Quality
Government Policies such as industrial relations, immigration, education and training affect the size and the quality of the labour market.
Size of the labour market can be taken to mean the size of the labourforce. The Quality of the labour market refers to the general health, motivation, skills, and education and training levels possessed by those persons in the labourforce.
Influences of the Australian Labour Market
Demand Factors Affecting the Size and Quality of the Labour Market
Labour Demand at a macroeconomic level will be influenced by the following:
- The total level of economic activity or aggregate demand. If economic growth is high as it has been, there will be an increased demand for labour as spending and output have risen, increasing the demand for productive inputs including labour.
- The productivity of labour will influence decisions by employers to hire workers. Rising productivity levels will lead to an increased demand for labour as employers are likely to hire more productive workers to increase output at a reduced...