Chapter-8-Economic Development Labor-Markets.pptx

Economic development labor market

1. Chapter 8 Labor Markets

2. Learning Outcomes evaluate the demand for and supply of labor and its implications on labor market equilibrium; discuss labor market equilibrium; elaborate on individual earnings and wages, with a focus on the minimum wage intricacies; evaluate labor market discrimination and its effect on market efficiency;

3. discuss the human development index (HDI) as a metric for economic growth and development; recommend key areas to focus on fair labor for economic development; and understand labor markets at work in the eyes of a professional in labor and manning agency.

4. "The division of labor was limited by the extent of the market."

5. Introduction Among the factors of production, land, labor , capital, and entrepreneurship , labor is the most important, and in fact, has the largest share in almost all economies with the gross national earnings.

6. DEMAND FOR LABOR Demand is the link between the price of a product and the quantity demanded for it.

7. Labor is the input to a factor of production. In most cases, we hire labor to produce goods to sell. Labor markets , like any other markets, exist with the invisible hand at work, the forces of supply and demand.

8. Equilibrium Wage and Employment: Equilibrium Wage: The wage rate at which the quantity of labor demanded by employers equals the quantity of labor supplied by workers. At this wage rate, there is neither a shortage nor a surplus of labor in the market. Equilibrium Employment: The level of employment where the number of people willing to work at the prevailing wage equals the number of jobs available. It reflects the optimal allocation of labor resources in the economy.

9. Computing the labor market involves analyzing various aspects related to employment, unemployment, job vacancies, and other relevant factors that impact the supply and demand of labor. Here are the key steps and considerations for computing the labor market: Define the Scope : Determine the specific aspects of the labor market you want to compute, such as employment rates, unemployment rates, labor force participation rates, job vacancies, or wage trends.

10. 2. Gather Data : Obtain reliable data from sources such as Philippine Statistics Authority, labor market surveys, employment reports, and industry-specific data sources. This data typically includes: Number of people employed Number of people unemployed Labor force participation rate Job vacancy rates Average wages and compensation levels Industry-specific employment trends Regional variations in employment and unemployment

11. 3. Calculate Key Indicators:

12. 4. Analyze Trends and Patterns: Once you have computed these key indicators, analyze trends and patterns in the data. Look for changes over time, seasonal variations, regional disparities, and impacts of economic policies or external factors (such as technological advancements or global events) on the labor market.

13. 5. Interpret Results : Interpret the computed data to draw conclusions about the health of the labor market. Assess whether the market is growing, stagnant, or experiencing challenges. Consider implications for policy-making, workforce planning, and economic forecasting.

14. 6. Communicate Findings : Present your findings through reports, presentations, or visualizations to stakeholders, policymakers, or decision-makers. Provide actionable recommendations based on your analysis to improve labor market outcomes, promote employment growth, or address unemployment challenges.

15. Supply of Labor The basic rule is that all other things remain constant, ceteris paribus, as the price increases, the quantity supplied also increases or vice versa.

16. It is significant to note the reservation wage theory that says individuals would be choosing not to work when they value leisure more than the wage rate that they would be receiving from working.

17. Reservation wage- is the minimum rate that a worker is willing to accept for a specific job, at a given period of time, considering there is no change in an individual's overall wealth, marital status, length of unemployment, health, and security and disability issues.

18. DEMAND AND SUPPLY OF LABOR The graph in Figure 7.3 shows the relationship between the labor market and the effect on the individual employer. The point where they meet is the equilibrium wage and quantity. The demand represents the revenue attributable to additional workers as they are hired.

19. The wage rate basically is the profit-maximizing level of individual employer, also known as the marginal resource cost (MRC). In a competitive labor market, the firm can pay to hire additional workers.

20. There are situations wherein there is a change in demand even if the price does not change. In effect, it shifts the demand curve to the right.

21. Factors that result in a "change in demand” As the price of a substitute service increases, demand also increases. For example, we always go to a famous hairstylist salon situated in a shopping mall. If the price of the same service outside the mall increases, the demand for the salon service in the mall increases as well.

22. 2. Another factor is the price of the complementary service. Let us say that the price of the shampoo- ing in the salon increases and the demand for the salon service decreases, hence there is an inverse ( relationship between the price of a good or service and the quantity demanded by consumers) relationship between the price of the complementary service to the demand. 3. If there is an expectation that the price of the salon service increases in the future, then the demand for it also increases.

23. Let us assume this time that the income increases. The demand for the "no brand" salon decreases, a service that is considered inferior to the hairstylist salon.

24. When the population of the city increases, there is an effect that may be attributable to the migration from the provinces or other countries. Therefore, there will be an expected increase in the demand for the salon service. As the market for salon services increases, an expected increase in salon service also increases.

25. Lastly, there is an expected shift in the demand curve when the taste or preference of clients and potential clients changes. It may be deemed favorable or not favorable depending on the change itself.

26. What are the Factors that Affect the Demand for a Service?

27. Factors that Affect the Demand for a Service price of a substitute service price of a complementary service expected future prices client's income or wealth population growth increase in the size of the market change in the taste and preference of the consumers

28. There may be a shift in the supply curve, even if there is no change in price when some factors change. When more and more agencies sprout in the market doing the same job as us, it will cause an increase in the number of workers given a certain level of price. An expected increase in the wage of workers in the Middle East would mean an increase in the number of workers that we will source out and deliver.

29. Let us say the government would provide incentives to agencies, such as tax cuts; would mean an increase in the number of workers that we can provide to the market, an increase in tax would mean the other way around.

30. Partnership of our government to other states in supplying workers, promising a better benefit package with our workers, safety and protection, then the supply of workers would definitely increase, as more would like to be benefited by the agreement.

31. What are the factors that may affect the change in supply, even without changing the price of labor ?

32. Factors that may affect the change in supply, even without changing the price of labor : Cost to acquire more skills for labor The number of agencies and businesses providing the same labor Expected future increase or decrease in wages Technology Government subsidies Taxes

33. INDIVIDUAL EARNINGS AND WAGES As an employee invests his or her time, labor services, ideas, skills, knowledge, and abilities, the employer must fairly compensate these with a reasonable wage, that is at par or even higher with the same employee contributing the same resources in the market.

34. Wage must cover the opportunity cost , the value that is lost like the worker's free time and the income that may be derived from another job, or from doing something else.

35. Derived demand -If the demand for a certain good or service is booming, more of it is produced and offered in the market, and ultimately increase wages. The demand for a factor of production derived from the demand for its product, e.g., there is a demand for labor in the construction industry because of the demand for houses,' engineers, and some medical professionals are in low supply, and yet the demand for their skill is high; therefore, the wage is also high.

36. Social work is considered a very important job for poverty alleviation and protection of human dignity, the wage is low, that is because the supply for social work is high.

37. Efficiency wages- There are some businesses that provide high wages to their employees, compared to the market equilibrium, to motivate them to work and not leave the company (among other reasons).

38. Labor unions can affect wages as they advocate the benefits and interests of the employees and improve their working conditions. Through a collective bargaining agreement (CBA), this is more common in the government sector and is slowly declining in existence.

39. MINIMUM WAGE A minimum wage is the price floor that ensures employees receive this amount or more, and employers are prevented from paying below this amount.

40. Paying the minimum wage stops some employers from hiring unskilled workers. Instead, they look for unskilled or semi-skilled workers, leaving this type of labor to be untapped, hence unemployment increases. Skilled workers are those who have special skills or those who have had long training.

41. In the graph in Figure 7.6, we can see that imposition of a minimum wage (price floor) would change the behavior of the labor supply and demand. The quantity demanded will decrease, while the quantity supplied will increase, by the wage price difference with the existing wage rate. In effect, this would create a surplus, but in the case of labor market, we call this unemployment. In addition, from the point of view of the wage taker, that is the individual employer, a minimum wage, a new marginal revenue cost is set, leaving a decrease in the quantity of labor they would want to hire up to the level when MRP = MRC or the maximum level they wish to employ. This situation is only true in a competitive market and when the wage is lower than the minimum wage, although there are a lot of businesses now that pay more than the minimum wage.

42. The question now is, how much should be the minimum wage? An increase in the wage would mean more and more people have the capacity to buy goods and services. It increases the demand for products and stimulates employment and the economy.

43. A high minimum wage in high median places like major cities is probably good, but detrimental to the low median areas like the town and provinces, hence, we need to key in all factors including the geographical location of the economy for the proper determination of the wage. In the end, economists do agree that skill and education are factors that the market sees valuable. Perhaps because it is in low supply, in high demand, and therefore, those who have it are promised higher wages.

44. It is important to note that not all regions have a minimum wage, and for those who have, the minimum wage is different from one to another. In the Philippines, the minimum wage in the National Capital Region (NCR) is different from the rest of the regions.

45. The minimum wage will not solve the problem of poverty and inequality; it will just be a trade-off of something that may have a positive or negative impact on the economy. It is still significant that the people be educated and develop skills that may be used to contribute to the development of the country.

46. How much is the minimum wage in Metro Manila?

47. As of July 2024, the minimum wage rates in Metro Manila (National Capital Region or NCR) are as follows: Non-Agriculture Sector: PHP 600.00 per day for workers and employees in establishments with more than 10 workers. PHP 625.00 per day for workers and employees in establishments with 10 workers or fewer. Agriculture Sector: PHP 500.00 per day for workers in non-plantation and plantation agricultural enterprises. Retail/Service Establishments: PHP 13,890.00 per month for workers and employees in establishments with more than 15 workers. PHP 12,702.50 per month for workers and employees in establishments with 15 workers or fewer.

48. How much is the minimum wage in Nueva Vizcaya ?

49. As of July 2024, the minimum wage rates in Nueva Vizcaya, Philippines, are as follows: Non-Agriculture Sector (per day): PHP 362.00 for workers and employees in establishments with more than 10 workers. PHP 357.00 for workers and employees in establishments with 10 workers or fewer. Agriculture Sector (per day): PHP 332.00 for workers and employees in non-plantation agricultural enterprises. PHP 322.00 for workers and employees in plantation agricultural enterprises. Retail/Service Establishments (per month): PHP 8,370.00 for workers and employees in establishments with more than 10 workers. PHP 8,150.00 for workers and employees in establishments with 10 workers or fewer.

50. INTERNATIONAL IMMIGRATION Immigration- occurs when people move between countries and become part of the labor market of that country. The main economic benefits of immigration are the following: increases the national output, the GDP; enhances specialization especially with highly skilled immigrants; and provides net economic benefit to the country.

51. Immigration resulted in advancements in technology and improved transportation in terms of speed, cost, and access. Some would speculate that it is also due to some security issues and the desire to look for greener pastures.

52. Two main arguments in the economic impact of immigration It increases demand because of the population increase, but low-skilled workers tend to add to the poor and worsen inequality in the market. Highly skilled immigrants contribute to a large employment surplus, as they innovate and become entrepreneurs, adding to the factors of production in the country.

53. LABOR MARKET DISCRIMINATION Discrimination happens, favoring some group of individuals according to gender, age, ethnicity, nationality, and disability. In evaluating wage discrimination in the labor market, we must clearly identify first who among the workers are favored and who are discriminated. Perhaps, this may be apparent with the wages that the workers are receiving, having the same position and nature of the job.

54. We assess the employer who offers low wages to the discriminated group, thereby causing lower labor supply and lower productivity. The economy with this irrational decision-making begins misallocating resources and tends to effect economic inefficiency.

55. HUMAN DEVELOPMENT INDEX Development Index (HDI)- indicates the average well-being of people in a country in a given period of time. It is a composite index combining life expectancy at birth, mean years of schooling, expecting years of schooling, gross national income per capita, and non-income using a geometric mean.

56. Three main components in determining the HDI Life expectancy- The average life of the people in a country according to various demographic factors, such as age, gender, and so on is a part of life expectancy. Knowledge- The average year of schooling of adults and children is a part of knowledge. Standard of living. The GDP per capita plus all income by citizens derived abroad, foreign investments, and foreign aid received.