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In today’s class, we will be talking about the labour market. Enjoy the class!
What is Labour market?
Simply defined, the labour market refers to the supply and demand for labour such that employees provide the supply and employers to provide the demand. It is a major component of all economies and is intricately tied in with markets for capital, goods and services. At the macroeconomic level, supply and demand are influenced by both domestic and international market dynamics, as well as other important factors such as immigration, the age of the population and education levels. Relevant measures include unemployment, productivity, participation rates, total income and GDP. At the microeconomic level, individual firms interact with employees either to hire them or to fire them as well as raising or cutting wages and work hours. The relationship between supply and demand influences the hours the employee works and compensation she receives in wages, salary and benefits.
The concept of Labour force
The concept of the labour force is generally used to describe people working for either a single company or the entire workforce of a particular industrial sector, region or a country. Some companies like to describe their values as their workforce because when the workforce is strong and motivated, productivity will certainly be high.
Do note that whereas labour force within corporations typically define the number of personnel working there, the labour force of a country includes both the employed and the unemployed. The labour force participation rate [LFPR] otherwise known as the economic activity rate, EAR, is the ratio between the labour force and the overall size of their cohort (i.e., the national population of the same age range). The term generally excludes the employers themselves, focusing on everyone capable and available to be hired to work.
Factors affecting the size of the labour force
- Population: The size of a population determines (to a great extent) the number of people who will be available to engage in production activities. If the population is low, the number of people capable and available to work will be low. On the other hand, if the population is high, there will be more people available to work. Meanwhile, another factor to consider as it relates to population is whether the population is young or aged. A population comprised of mostly able-bodied youths will definitely have a better workforce than those comprised of aged, dependent people.
- Educational Qualification: Education plays a key role in determining the size of any given labour force. This is because very many of the available professions in the world require a high level of academic mastery so that one may fit into their given fields and be productive.
- Government Policies: The Government plays a huge role in determining the size of the labour force. If government policies are favourably-disposed to business enterprises, they will be compelled (by the labour of demand) to hire more people who will facilitate the production exercise. But if [unfortunately] the policies of Government are bad, businesses will not thrive and as such a lot of people will not be absorbed by the labour market. This will in turn make the labour force small.
- The number of available Industries: The number of the available industry also determine the size of the labour force. If the industries are few, fewer people would be hired. In a country like Nigeria where they are just a few industries, we have a small labour force because very many people are out of work due to the unavailability of work.
- Wage/Salary Scales: The remuneration of labour often serve as a factor determining the size of the labour force. It goes like this- if the remuneration is favourable, more and more people will be attracted to work. But if this is not the case, it will ultimately discourage many from working.
Efficiency and mobility of labour
Mobility of labour means the capacity and ability of labour to move from one place to another or from one occupation to another or from one job to another or from one industry to another. There are two types of labour mobility- geographic and occupational. Geographic labour mobility occurs when labour moves from one place to another in search of better-paying or better-satisfying jobs. Most people in Nigeria have family relatives who have emigrated out of the country in search of greener pastures abroad. Meanwhile, occupational labour mobility can also occur, such that people shift jobs; moving from one sector to another. There are a number of Nollywood actors who were once either doctors or bankers but along the line decided to become actors. That exemplifies occupational labour mobility.
Factors determining the mobility of labour
There are several factors that determine the mobility of labour. Some of these factors include-
- Education and Training
- Outlook or Urge
- Social Set-up
- Means of Transport
In our next class, we will be talking about Supply and Demand. We hope you enjoyed the class.
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