CHAPTER 1: INTRODUCTION TO LABOR ECONOMICS

OVERVIEW Economics How the society use SCARCE RESOURCES to fulfill UNLIMITED WANTS Scarce resources: Land, LABOR, capital, entrepreneur Labor economics Examine how the market functions; and what are the outcomes of the labor markets Market functioning might be based on: Labor cost – wage rate Non-monetary aspects such as working environment, career development, medical benefit, etc. Outcomes of the labor markets: Entry of foreign workers Unemployment Minimum wage

WHY STUDY LABOR ECONOMICS? To address socioeconomic issues Understand the causes of socioeconomic issues such as why female workers are greater than male workers? race discrimination Free trade – flow of labors – legal and illegal immigration Labor as dominant resource Work – get income – contribute to national income of a country Income – spend – profits for firms – national income. Unique features of labor Labor demand derived demand / indirect demand demand for labor depends on the demand for goods and services that the labor produces. Labor supply labor is rented (by receiving wages and salaries), not bought or sold. Interested in non-monetary benefits such as annual leave, sick leave, medical benefits, etc.

ASSUMPTIONS UNDERLYING ECONOMIC PERSPECTIVE Relative scarcity / limited Time (work / leisure) Income (spend / save) Societal resources (land, labor, capital, entrepreneur) Purposeful behavior – Choose the best alternative Opportunity cost – what you sacrifice Adaptability Labor market respond to changes based on costs and benefits.

MICROECONOMICS vs MACROECONOMICS Decisions made by individual economic units (individual, firm) Demand and supply of labor Work-leisure decision Labor participation rate Macroeconomics Decisions made by the economy as a whole. Employment and unemployment Labor productivity Aggregate income, GDP