1 The labor market n Labor Supply –Workers n Labor Demand –Firms n Market Clearing? –Full employment

2 Characteristics or modes of mobilization of labor force Non-Commodity n Forced -> Slave n Free –Household –Militant n Wage earner –Civil servant –House helpers Commodity n Prisoners n Free –Self employed –informal sector –Peasants n Wage earner –private firms

3 Structure of labor market

4 Structure of Labor Market

5 Labor Supply People in the labor force n 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)

6 People not in the labor force n Participating as students in the education system n Unpaid household work n Retired or with pensions n For health reasons n Volunteer in community services

7 Research questions on the labor supply n Who is in the labor market? n Who is out of the labor market? –Age –Gender –Position in the household –Location

8 Why the participation rate changes overtime? n Cultural factors –women in the labor market –scholarships and school retention –more years of study n Discouraged workers effect n Additional worker effect

9 Some participation rates in the US labor market

10 Differences in participation rate according to gender

11 Participation rate according to race

12 Participation rate according race and gender

13 Civilian population between 16 and up and employed population

14 Research questions on the labor demand n Who has a job? –Gender –Age –Qualifications –Salary/Wage –Hours of work –Relation with the owner of the firm

15 Rate of Employment emp/eap

16 What means to be employed n 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)

17 What means to be employed n Independent workers –Professionals –Self Employed –Employers –Workers without pay devoting a number of hours to earn money or goods or services

18 Some problems with the estimation of the employment n Underestimates the production for self consumption, especially at rural level n The legal age hides child labor n Informal workers above the age of retirement n Seasonal workers not captured by the survey

19 Research questions on the Labor Demand n Who is unemployed? –Age –Gender –Ethnicity –Duration of unemployment –Turn over

20 Unemployed and rate of unemployment

21 Research questions on the Labor Supply n What means to be under employed? –Does she/he wants to work more hours? –Social/Demographic considerations

22 What is to be under employed n 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. n Hidden under employment –Low hourly payment according to qualifications n Voluntary under employment

23 Research questions on the labor supply n Who is over employed? –Hours of work –Social/demographic characteristics

24 Evolution of the civilian population above 16 years old

25 Civilian and EAP

26 Rate of participation (total)

27 Participation rate accoding to gender

28 Evolution of employment and rate of employment (Total)

29

30 Evolution of unemployed and unemployment rate

31 People not in the labor force

32 People not in the labor force but want a job now

33 Male and Female unemployment

34 Some dynamic analysis of unemployment

35 Changes in labor participation n It is difficult to define a single labor supply function n For adult males participation is a function of the demographic growth n 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 n Additonal workers are function of what happen with the other two.

36 Labor supply functions n Male participation –f(pop.growth) n Female participation –f(wages, prime worker unemp, pw Y) n Youth participation –f(pw unemp, pw Y, Female emp.)

37 Some findings n Male participation have been declining over time in relative terms n Female participation, excluded the growing trend, tend to be counter cyclical if employment represents the cycle. n Youth have a similar behaviour to females

38 Some findings n In the US, female participation can have an U shaped behavior, since wage increases may induce it. n With youngsters the trend is less clear

39 How may an ELR program affect labor supply n 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

40 Other effects of ELR on labor supply n If schooling is a complementary part of ELR (scholarships for youngsters) the rate of participation could decrease. n If childcare is considered and ELR activity, rate of participation may decrease

41 The Labor Demand n 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) n The employment to GDP elasticity varies according to the business cycle

42 Labor Demand n 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

43 The need to work with different labor markets n In countries with clear formal and informal sectors, the demand for labor should be taken into account in a different way. n Informal markets are more wage sensitive than the rest. n Informal markets are a way to escape “stickiness” of unionized wages