Professional Documents
Culture Documents
Demand for labour Demand for labour is a derived demand Factors of production are not wanted as an end product but rather for what they can produce The number of workers a firm wishes to employ depends mainly on the demand for the output they produce Aggregate (total) demand for labour depends principally on the level of economic activity If the economy is growing and firms are confident that it will continue to grow employment levels will tend to increase
Derived demand - occurs when the demand for a factor of production arises from the demand for the output it produces
Marginal productivity theory This is the key theory underpinning the demand for labour The theory states that demand for workers depends on their marginal revenue product MRP is the value of the physical addition to output arising from hiring one extra unit of a factor of production Where the marginal cost of taking on an additional unit of labour equals its marginal revenue product the equilibrium quantity of labour employed will be established
With perfect competition the firm is a price taker so the MR will be equal to the price The firm will be able to sell all of its output at the market price If there is perfect competition in the labour market firms can recruit workers at a constant labour rate
The elasticity depends on The skills and qualifications required firms that require highly qualified workers will find it more difficult to attract workers with wage rises since the supply is low. Elasticity is higher for lower skilled jobs
Unemployment
Unemployment is a state of joblessness in an economy Unemployment is usually measured in terms of unemployment rate where the number of unemployed individuals will be divided by the total number of employed individuals According to International Labor Organization definition, public aged 16 and above will be called as unemployed if they are out of work, need a job, have vigorously wanted work in the last four weeks and are available to start work in the next two weeks, have found a job and are waiting to join the job in the next two weeks.
Types of unemployment
(1) Voluntary unemployment In this type of unemployment a person is out of job of his own desire doesn't work on the prevalent or prescribed wages. Either he wants higher wages or doesn't want to work at all. (2) In voluntary unemployment In this type of situation the person who is unemployed has no say in the matter. It means that a person is separated from remunerative work and devoid of wages although he is capable of earning his wages and is also anxious to earn them.
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In voluntary unemployment
Cyclical unemployment - This is the result of the trade cycle which is a part of the capitalist system. In such a system, there is greater unemployment and when there is depression a large number of people are rendered unemployed. Since such an economic crisis is the result of trade cycle, the unemployment is a part of it. Sudden unemployment - When at the place where workers have been employed there is some change, a large number of persons are unemployed. It all happens in the industries, trades and business where people are employed for a job and suddenly when the job has ended they are asked to go.
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In voluntary unemployment
Unemployment caused by failure of Industries - In many cases, a business a factory or an industry has to close down. There may be various factors responsible for it there may be dispute amongst the partners, the business may give huge loss or the business may not turn out to be useful and so on. Unemployment caused by deterioration in Industry and business - In various industries, trades or business, sometimes, there is deterioration. This deterioration may be due to various factors. In efficiency of the employers, keen competitions less profit etc. are some of the factors responsible for deterioration in the industry and the business.
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In voluntary unemployment
Seasonal unemployment - Certain industries and traders engage workers for a particular season. When the season has ended the workers are rendered unemployed. Sugar industry is an example of this type of seasonal unemployment.
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