LABOR ECONOMICS

Introduction


Prepared by: Karen Grace Valdez, MBA
THE CORE PROBLEM
Desire of society to exceed productive capacity
How CHOICES are made, and the outcomes of
these choices
Labor is a productive and a scarce resource
ACTORS IN THE LABOR MARKET
The workers (supply of labor)
The firms (demand for labor)
The government
Skills to acquire
When to quit?
Which occupations
to enter
Joining a labor union
How much effort to
allocate to the job
Working hours
Optimality of
workers
LABOR ECONOMICS:
UNDERSTAND, ANALYZE, PREDICT
Facts without theory is just as empty as the study of
theories without facts.
How labor market works (theories & principles)
Social/public policies/rules that affect choices
Organization, functioning and outcomes of labor
markets
Employment relationship between workers and
firms
Distribution of earnings and wages
Unemployment structure
Skills of workers
Labor turnover, etc

WHICH IS MORE IMPORTANT:
AN IDEA OR A FACT?
OLD: Historical & Descriptive
- Constructing theories, calculating unemployment
rates
NEW: Applied micro and macro theories
- Economic and social factors that affect the labor
market
Theories help us understand how facts are generated.
NEW LABOR ECONOMICS:
THE ECONOMIC PERSPECTIVE
Scarcity
Rational choices
(marginalism)
Decisions are altered or
adapted in the light of
changing market
circumstances
THE ECONOMIC PERSPECTIVE:
INCENTIVES AND DISINCENTIVES
Which one is an economic perspective?

Most workers in the US would retire at 65 because
even without pensions because this age has been
the customary retirement age.

Most workers in the US would retire at 65 because at
this age, they become eligible for private pensions
and SS benefits
LABOR ECONOMICS HAS MICROECONOMIC
AND MACROECONOMIC ASPECTS
Microeconomics Macroeconomics
Labor supply
Labor demand
Participation rates
Work-leisure decisions
Quality of labor
Efficiency pay schemes
Wage structure
Mobility and migration
Unions and collective bargaining
Government
Discrimination

Distribution of earnings
Productivity
Employment and unemployment
INDICATE WHETHER THE STATEMENT IS
MICROECONOMIC OR MACROECONOMIC
1. The unemployment in the Philippines is 6.8% in
2008.
2. Workers at the Rebisco factory are paid 400 per
hour.
3. The productivity of Filipino workers as a whole
increased by more than 2 percent per year in the
last decade.
4. The money or nominal wages of nursing aids
increased by 3% in 2008.
5. Nestle Corporation laid off 15 workers last month.
SOME POLICY ISSUES EXAMINED BY MODERN
LABOR ECONOMICS
1. Why did the labor force participation rate of
women rise steadily throughout the past centuries
in industrialized countries?
2. What is the impact of immigration on the wage
and employment opportunities?
3. Do minimum wages increase the unemployment
rate of less-skilled workers?
4. What is the impact of occupational safety and
health regulations on employment and earnings?
5. Are government subsidies of investments in
human capital an effective way to improve the
economic well-being of disadvantaged workers?
ASSIGNMENT: CROSSWISE
1 short bond paper, Font: Times New Roman, Font size: 12,
single space
How did Gary Becker, a Nobel Prize winner (1992) in
Economics, extended the analysis of labor markets?
(Summarize--Bulleted ideas) Indicate your source

crosswise (yellow paper)
Read a recent journal about a labor issue (preferably in the
Philippine context). Identify
1. Research objectives/problems (bulleted)
2. Research methodology
3. Answers to the research problems (conclusion) (bulleted)
4. Recommendations (bulleted)