Labour Economics

In this slide we study labor economics, some perspective and conclusions.

1. LABOUR ECONOMICS LABOR ECONOMICS

2. Contents: 1- Labour economics as a discipline What is labour economics. Importance of labour economics. 2- Economic perspective. Choice 3-Unemployment 4-Infalation

3. 1-Labour Economics as a Discipline:

4. What is Labour Economics? Labour economics seeks to understand the functioning of the market and dynamics for labour. Labour markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demanders of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income. It is an important subject because unemployment is a problem that affects the public most directly and severely. Full employment (or reduced unemployment) is a goal of many modern governments.

5. There are two sides to labour economics. Labour economics can generally be seen as the application of microeconomic or macroeconomic techniques to the labor market. Microeconomic techniques study the role of individuals and individual firms in the labour market. Macroeconomic techniques look at the interrelations between the labour market, the goods market, the money market, and the foreign trade market . It looks at how these interactions influence macro variables such as employment levels, participation rates, aggregate income and Gross Domestic Product.

6. Importance of Labour Economics : Socioeconomic Issues Gender and race discrimination Legal and illegal immigration Fall in unionization Free trade Quantitative Importance 75% of national income goes to labour.

7. Importance of Labour Economics Unique Characteristics Labour is rented and not bought/sold Non-monetary aspects Institutional factors (Unions, licensing, minimum wage, discrimination) Labour demand is a derived demand

8. 2. Economic Perspective

9. Theories of Choice Labour economics uses theories of choice to explain behavior of labour market participants and resulting outcomes. Theories rest on three assumptions…

10. Choice 1- Relative scarcity: Society must choose how and for what purpose labour and other resources (land, capital, entrepreneur) should be allocated since this resources are scarce.

11. Example of choices: How much time to devote to jobs, to work in the home, and to leisure. How much present income to forgo for the prospects of obtaining higher future earnings. Which goods and services to buy and which to forgo. Relative scarcity of time, personal income. And societal resources is basic element of economics perspective.

12. 2-Purposeful behavior: Individuals behavior/make choices/ decisions that maximize their satisfaction, pleasure or utility.
Individuals make choices purposefully with an expected net gain. Examples: a worker will compare the extra utility (income) gained from an added hour of work with the values of the lost leisure. A firm will compare the added revenue from hiring a worker with the extra wage cost. It is not easy to achieve intended goals due to imperfect information.

13. 3- Adaptability: Workers and firms adapt to changes in expected costs and benefits. Examples: some workers will adjust the number of hours they desire to work when the wage rate they receive changes. Fewer people will decide to obtain a specific skills when the training cost rises or when the wage paid to those already possessing the skills falls. Firms will adjust their hiring when the demand for their product changes.

14. Economic perspectives assumes that workers, employers and other labour market participants adapt, adjust, or alter their behaviors in responses to changes in expected costs and expected gains.

15. UNEMPLOYMENT IN PAKISTAN

16. Definition: Unemployment refers to a situation in which the workers who are capable of working and willing to work do not get employment. UNEMPLOYMENT

17. The factors of unemployment are numerous. But the major factors of unemployment in Pakistan are as follows: Poor Governance Political Instability Corruption Major Factors Of Unemployment In Pakistan

18. 1. Poor Governance: Good governance is an essential pre-condition for employment as it establishes the enabling regulatory and legal framework essential for the sound functioning of land, labor, capital and other factors of market Whereas good governance is considered to be non-existent in Pakistan and poor governance is taken one of the key underlying causes of unemployment in Pakistan. Factors of Unemployment

19. 2 . Political Stability: Political stability is fundamental to the creation of an enabling environment for growth and development. Unfortunately the political dilemma has furthermore cornered this issue Factors of Unemployment

20. 2.PoliticalInstability: Economic agents , particularly investors , must be reassured with regard to the continuation of policies ,should have confidence in the government’s credibility in order to operate effectively , and in the case of investors ,be induced to take risks . Factors of Unemployment

21. 3.Corruption: Corruption is one of the most dangerous factor that eroded Pakistan’s economic and governance system since its inception. In 2008, Pakistan was ranked as the 46 th most corrupt country out of the 180 countries of the world. The persistently rampant corruption in Pakistan not only jeopardizes its resolve to fight against unemployment rather adding to the menace of unemployment from all direction. Factors of Unemployment

22. Unemployment Rate in Pakistan

23. Suicide Cases By Unemployment Over the same period, 1,160 cases of attempted suicide were reported. According to the report: 469 people committed suicide for domestic reasons 136 because they were unemployed 193 over disputes within families 74 over the rejection of marriage proposals 85 after fights with parents 97 because of poverty 159 for other reasons.

24. “ ” Unemployment is capitalism's way of getting you to plant a garden. - Orson Scott Card

25. The causes are endless and countless. But the major causes of unemployment in Pakistan are as follows: Economic Causes Social Causes Financial Causes Major Causes Of Unemployment In Pakistan

26. Low Industrial Growth Rate: Low industrial growth rate is 1.7 % in Pakistan. Number of industries is not increasing in Pakistan. Lack of industries means less opportunities of employment. 1. Economic Causes

27. Reduction In Foreign Employment: Due to illiteracy, ill training and lack of skill & efficiency demand for our labor in foreign market is decreasing. Use Of Advanced Technology: A poor country uses backward techniques of production and labor intensive technologies. When it uses the advanced technology there spread more unemployment in the country. 1. Economic Causes

28. High Population Growth Rate: The population of Pakistan is increasing at a rate of 2.1 %. Due to high rate about two million people enter into the labor market each year. Law And Order Situation Of Karachi: Karachi is the biggest and an ideal place in terms of industrial base of Pakistan. Investors are not willing to invest in Karachi due to violence that has taken over Karachi in the past few years. 2. Social Causes

29. INFLATION “something which decides economy of the country”

30. Rise in Price It is a rise in the general price level caused by an imbalance between the quantity of money and trade needs.

31. The word "inflation" originally applied solely to the quantity of money. It meant that the volume of money was inflated, blown up, overextended.

32. According to Pigou “ Inflation arises when money income is expanding more than proportionate to income earning activity”.

33. Types of inflation (Rise in price) , 1) Creeping inflation 2) Walking inflation 3) Running inflation 4) Galloping inflation

34. Walking inflation: - When the price rise is moderate. It is a warning signal for the government to control it before it turns into running inflation. Creeping inflation:- The inflation of a nation increases gradually, but continually, over time .

35. Galloping inflation:- Prices rise by double or triple digit inflation rates like 400% or 999% per annum. Running inflation:- A rapid acceleration in the rate of rising prices more than 10% per annum is referred as Running Inflation

36. CAUSES OF INFLATION: Demand pull inflation(ex: petrol) Cost push inflation(ex: cement) 3)Over- Expansion of Money Supply 4)Increase in Population 5)Expansion of Bank Credit Black Money Poor Performance of Farm Sector