Login with Facebook

Microeconomic Analysis to the Demand for Labor

It is hard to describe and fully understand economics without looking at the labor market. The job market is the supply and demand for labor, where employees are suppliers, and employers demand. This a major component of any economy, and it is linked to the main markets of capital, goods, and services. It is crucial to economic development because one of the main parameters for determining economic growth is a low unemployment rate. When there is positive economic growth, many people have jobs, and the consumption rate goes higher. Consequently, markets grow faster and generate more revenues because the demand for their goods and services is high. The more they produce, the more job opportunities they create. And when there is negative growth in the economy, companies reduce production; they lay off workers and shut down some operations. Sometimes it leads to a total failure of some markets. In this case, the rate of unemployment spikes as consumption declines. There is no need for firms to keep many employees as they produce less.

This is the normal behavior of any economy. At one time, it surges and grows into a bubble, letting people enjoy the benefits of a strong economy before falling into a recession. A good example here is the events before and after the 2007/2008 Great Recession. Before the markets failed, there was a great economic bubble caused by a rise in housing costs. This looked like a great opportunity for firms to invest, who started giving out loans without even considering the capabilities borrowers. They used most of their properties are collateral. And the prices dropped abruptly. Borrowers were unable to pay back their loans. It became hard for lenders to sell the used properties as collateral, and even if they did, it was not enough to cover the money they had given out. Many went into states of bankruptcy as the financial market faced the biggest blow.

It was the labor market the suffered the most. Many lost their jobs and were forced to adjust their lives to the new reality. The rate of unemployment spiked, leading the general economy into more stress. Note that when people are working, the government spends less and earns more. They will pay taxes, which is put in development programs like infrastructure and similar projects. The labor market grows, increasing household consumption, which is another parameter for mearing economic growth.

On a macroeconomic scale, the demand and supply for goods and services are influenced by the dynamics in the domestic and international markets, as well as other factors like immigration, age, and education levels. The relevant parameters used in this case include unemployment, productivity, participation rates, total income, and gross domestic product. Coming down to the microeconomic level, individual firms make direct interaction with employees. They can hire them, fire them, increase and decrease their wages and hours as per concerned policies. There is a major relationship between supply and demand, which affects hours employees work and how they are compensated in terms of wages, salary, and benefits. It is hard to understand the concept of labor without understanding markets. These are simply companies in a particular economic ecosystem that produces similar products. For instance, the financial markets comprise of banks, insurance companies, and microfinance institutions, among many others. These markets are important economic growth because they show a sense of direction. There is not proper economic growth, or even analysis without looking at how markets are down.

Understanding Labor Demand

We can summarize the labor market as a factor market, meaning it offers a means by which employers find needs for labor, and millions of people provide their labor services by working in different industries. Labor demand is when firms require people to work in their production lines. It is very common when there is positive economic growth. Here, demand is high, and firms have to increase their production to meet these demands. Those who cannot do this face a lot of competition and may be left behind in terms of market capitalization. It is all about making decisions when there is an opportunity.

Many factors affect how many people business is willing to hire, with wage rate and salary as the most basic once. There is an inverse relationship between demand for labor and the wage rate that a business needs to pay as they hire more people to their production line. Hiring new workers is not a simple decision that a company will wake up and take. They have to consider all the right factors that encourage proper economic growth. 

The most important consideration is the activities happening in the general market. When things are going well, and there is an increase in demand, the firm will choose to invest in more workers.

Another factor that influences the demand for labor is the level of education. It is assumed that those who have gone through a higher learning system are more easily hired than those without such skills. Even so, in terms of earning, there are mixed reactions, since research has shown that there is a large number of college dropouts who have hired a degree holder. One NBC's television show called "The Apprentice: Street Smarts vs. Book Smarts presented a contest between contestants who had not college degrees, yet they were earning more than three times their opponents with a college degree. The two sides got involved in a heated argument against each until the final episode where a Tana, a 37-year-old 'street smart' (top-sales woman for Mary Kay), went up against Kendra, a 26-year-old 'book smart), a real estate agent. At the Donald Trump shouted to the college graduate Kendra that she was hired. These series come with an array of contestants who demonstrated that not every college graduate earns more than every high school graduate. However, on average, this always the case.

Many experts have attempted to measure the payoff from college by comparing how far the wages of college-trained workers are above those with less education. This has been the trend across the world, where payoff from college in the USA, for instance, has grown significantly over the past two decades. In the late 70s, the male college graduates aged between 25 and 35 were earning 28% more than their high school counterparts in the same age bracket. This gap had widened even further by 2006, where youthful male graduates from college were earning 76% more than those with high school diplomas. It was the same case with young female college graduates who were earning 54% more than those with high-school grades only in 1979, increasing to 86% in 2006.

These figures indicate that there is a drastic widening of the difference between workers with different education levels, which explains how demand and supply work in the labor market. You will always notice and an increase in the demand for college graduates compared to high-school graduates. By studying these shifts, we aim to discover why there are shifts, what determines the demand for labor, and how the demand and supply changes affect wages and employment. As stated above, there is a significant relationship between how household consumption and market growth.

The Labor Equilibrium

There are generally two types of markets in any economy, the perfect competition market, and the imperfectly competitive market. As the name suggests, perfect competition is where everything operates smoothly at the same level. There is perfect information, and no once firm is bigger than others. Everyone is a price taker since consumers know the prices and what they should expect from their products.

But this kind of market exists only in theory. It is a measure used in determining what a market should be like, and what influences real growth. This is why you will find the most markets run under imperfect competition. Only a few firms have the right information, which they are not willing to share because they need to use it to their advantage.

In any market, labor generates considerably more revenue than all other production factors together. For instance, in the United States, it is shown that labor accounts from about 73% of the general income since 1959. The rest comes from owners of capital and natural resources.

In other data, there were about 34 000 registered nurses working in Minneapolis – St. Paul-Bloomington, Minnesota-Wisconsin metropolitan area in 2013 as recorded by BLS. This figure is a combination of different employees, including hospitals, doctors' offices, health clinics, and nursing homes. On a plot, the demand and supply for labor determine equilibrium in the labor market, where the quantity supplied and the quantity of nursed demanded is involved. When there is a high demand for nurses, wages increase, because then, more employees are demanding for more there services. They will, therefore, post-high wages to attract qualified professionals. In this case, they were earning $75,000, and the quantity supplied increases to 38,000. At equilibrium, where the quantity supplied is 34,000, they earned $70,000. However, the number of nurses demanded a higher pay decline to 33,000. At the above-equilibrium salary, there would be an excess supply of nurses. If it went below equilibrium, at a salary of $60,000, the quantity supplied drops to 37 000, whereas demand increases to 40 000 nurses. We expect excess demand or a surplus to existing at below-equilibrium.

In short, when there is an increase in the salary of the nurses, the quantity supplied will soar. It attracts more nurses to apply for jobs here. Which means, more nurses will move from other cities to Minneapolis-St. Paul-Bloomington to find better-paying jobs. More people will also be willing to train as nurses as those who are trained venture more into full-time working as nurses. There will be a surge in the number of people looking to work as nurses in this region.

When equilibrium hits, the quantity supplied will be equal to the quantity demanded. This means any employer willing to hire a nurse at this equilibrium wage will easily find one, and ever nurse who accepts this wage gets a job. The salaries discussed above are derived from the 'average' nurse wage. But in real markets, there are mini-markets, like varying degrees of experience and credentials that further determine the wages. Many markets are like this, where thein contain closely related products, but differ in quantity. For example, like gasoline, you will find regular, premium, and super-premium, which vary in quality and price. The same applies to the labor market, where many applicants apply for the same job by being hired and paid according to their expertise levels.

Shifts in Labor Demand

The ceteris paribus assumption is used in determining the demand curve for labor, which shows the number of labor employees wish to hire. When there is a change in the wage or salary rate, there will be a change in the quantity of labor demanded. For instance, an increase in wages forces employees to hire less to maximize profits, which leads to a decrease in the quantity of labor demanded. And if the wages decrease, employees are more likely to hire more, increasing quantity on labor demand – a downward movement along the demand curve.

The main reasons provoke shifts in the demand curve. One of the main factors is labor demand based on the demand for products. If there is a demand for more computers, for instance, a large number of computer engineers will be hired. This is called the demand for output, where an increase in demand for goods produced increases both output price and profit.

Another factor is education and training, where a well-trained and educated workforce leads to an increase in the demand for that labor from employees. Increased productivity leads to increased demand. Technology changes may also cause a shift in labor demands where machines are used as substitutes for human workers. Also, an increase in certain technology can increase labor demand – acts as a complement to labor. Other factors include the number of companies, government regulation, price, and availability of other inputs.

In the labor market, households are on the market's supply side, while companies provide the demand. Labor demand is influenced by a number of factorsDemand for Labor, mainly the economic conditions within which the markets operate. All of these factors contribute to economic growth.

Author: James Hamilton


Comments

Need a custom
essay?

We will write it for you.
Order now

Free Essay Examples

Free essays:

All you need to know about Neuroendocrinology
All you need to know about Big data management
All you need to know about digital special effects
All you need to know Technical Writing?
Basics the Game Theory in Cryptoeconomics
Business innovation ideas for making money
Biosensors for cancer diagnosis
Business Analysis: Pricing strategies and Demand Curve
Consciousness: characteristics and peculiarities
Conservation Economics
Cybersecurity in business: challenges, risks, and practices
Corporate Behavior
Dance as an art form and entertainment
Discrimination Economics
Determinants of Wages
Deontology Vs. Utilitarianism
Ethics: an essay on the understanding of evil
Emotions: what are they? Theories explained
Economy and Air Pollution
Economic Externalities and How to Deal with Them
Factors Affecting Purchasing Behavior
Financial Statement Analysis
Factors Influencing Interest and Exchange Rates
Fiscal and Monetary Policies in Response to 2008/2009
Government's Intervention in The Labor Market
Guide on the Pathways of the nervous system
Game theory in microeconomics
Globalization: definition, causes, social impact and risks
How women can manage sexual harassment
How to conduct economic research?
How to define the Enterprise Value
How cancer is developed - Cancer biology
Imperfect Information and Asymmetric Information
Imperfect Information in Insurance
Introduction to Labor Markets
Investment in Human Capital
Journalism: What is News?
Journalism: Broadcast media and Television Presenters
Journalism: Sources of News
Journalism and Law
Key Determinants of National Income
Key Factors That Affect Pricing Decisions
Kinetic models in biology and Related fields
Know about the different forms of traditional African dances
Latest technology trends
Latest dance trends
Microeconomic Analysis to the Demand for Labor
Modern journalism
Neuromuscular disorders
National Economies, Fluctuation, and Responses to Fluctuations
Neurotransmitters: what they are and different types
Nanomedicines to target tumors
Organizational motivation and its effects
Overcoming Hiring Challenges for Nonprofit Organization
Parkinson's disease
Perspectives on Television: Analysis
Russian School of Mathematics
Research and Development
Risk Sharing in Insurance and Asset Markets
Risk and the value of information
Structure of the nervous system
Structure of a Corporation
Schizoaffective disorder: how to live better with it
Segregation in the US.
The Role of Internal Audit in Corporate Risk Management
The Use of Law on Economics and Vice Versa
The political theory of Thomas Hobbes
The Game Theory in Social Media
Unions
Unemployment
Utilitarianism Vs. Kantianism
Understanding Auctions and Auction Theory: Part 2
Various theoretical perspectives of sociology
Virtual reality, what it is and how it works
What is Transcranial magnetic stimulation (TMS)?
What are the different genres of films?
4 Facts about Origin of Mathematics!
5 techniques to create an animation
10 emerging technologies according to World Economic Forum
10 strategies to maximize corporate profits
3d Model Of Building
6 Medical Technologies that revolutionized the healthcare in 2020
All you need to know about the ACA Code of ethics
Architecture and Democracy: An Introduction
Architecture and Democracy: Democratic Values
Architecture and Democracy: Democratic Procedures
All You Need to Know About a Synthesis Essay
An essential guide to understanding Film Theory
Application of Artificial Intelligence in Cyber Security
Applications of electrical engineering
Augmented reality: what it is, how it works, examples
Advantages And Disadvantages Of Social Networking
All you need to know about Cryptography
Applications of astrophysical science
All you need to know about architecture engineering
Applications of geological engineering
Artificial intelligence and medicine: an increasingly close relationship
An insight into Computational Biology
ACA code of conduct
A Rose for Emily
Applications of Mathematics in daily life
Architecture mistakes to avoid
All you need to know about Toxicology
All you need to know about Holistic Medicine
All you need to know about linguistics
An introduction to Linguistics and its subfields
All you need to know about Anxiety disorder
All you need to know about Drones
A Brief Insight into Political Science
Assumptions related to feminism
All you need to know about Byzantine emperors
All you need to know about labour economics
An insight into xenobots -the first-ever robots
An ultimate guide about Biomaterials
A Comprehensive Introduction to the Mona Lisa
Analysis methods of Transport through biological membranes
An ultimate guide about biochemical reactions
Analysis of brain signals
Artificial Gene Synthesis
Application to synthetic biology of CAD methods
All you need to know about metabolic pathways
Applications of BIOMEMS
All you need to know about the epidemiology
Asian vs. western leadership styles
All you need to know about Smart prosthesis
Analysis of Economy: Output of Goods and Services (GNP), and GDP on Economic success
A Guide to Pricing Strategies
An Overview Of Economic Studies
Analysis of Fiscal and Monetary Policies
Analysis of Business Cycles
Analysis of Consumption and Investment
A Look into Regression Analysis
Analysis of Household's Consumption and Savings Behavior
All you need to know about Capital Budgeting
All you need to know about risk management
Art looted in wartime.
Appropriate use of Data in Economics
All you need to know about reaction kinetics?
A historical overview of Financial Crises
All you need to know about management discipline?
An insight into the error-correction models
All you need to know about Data visualization
All you need to know about Work-family balance
All you need to know Technical Writing?
All you need to know about digital special effects
All you need to know about Big data management
All you need to know about Neuroendocrinology
How to Write a Personal Essay
Housing Needs in America
How to Write a Description Essay
How to Create an Excellent Scholarship Essay?
How to write a cause and effect essay
How to Hire the Best Essay Writing Service Provider?
How to Write a College Application Essay?
How to get the most out of your English lectures
How to write Expository Essay
How to succeed in your psychology class?
How to Write an Academic Essay in the Shortest Time?
History of Journalism
How Different Sectors are Using Artificial intelligence (AI)
How to write an informative essay
How to deliver persuasive essays?
How to Give a Convincing Presentation
How to write an essay on leadership?
Historical Art Still Around Today
Humanoid robot: what it is, how it works and price
History of Chemistry
Healthcare Advanced Computer Power: Robotics, Medical Imaging, and More
Healthcare AI: Game Changers for Medical Decision-Making and Remote Patient Monitoring
How to understand different types of English
How to Cope with Chronic Pain
How African American choreographers and dancers have influenced American dance
How mobile robot can do in logistics or in production
How To Become a Successful Entrepreneur
History of the Philosophy of Feminism
How is the climate changing?
How to Track Your Content Marketing ROI
How to Gun control In the USA?
Historical and contemporary role of labour in the modern world
How breast cancers are classified?
How the cells of our body communicate?
How the Lymphatic System Works?
How Digestive System Works
How to complete your capstone projects effectively?
How to write a research project
Healthcare technologies that help patients with better self-management
How to choose the topic of the senior capstone project
How to make your business survive at economic crisis
How can immigrants blend in the American society?
How does the economics of war affect society?
Hate speech on social media.
How to Build an Economic Model
How to start a healthcare startup?
How can financial illiteracy harm you?
How cancer is developed - Cancer biology
How to define the Enterprise Value
How to conduct economic research?
How women can manage sexual harassment
Introduction to Urban Studies
Importance of dance in education
InMoov: how to build an open source humanoid robot
Importance of KYC verification to making the Blockchain secure
Importance of Rhythm
Importance of dance student evaluation
I/O control methods -types and explanations
Identity theft: what to do?
Introduction to Utilitarianism
Importance of 3d Modelling in Architecture
Importance of online journalism
Image processing in medical diagnosis
Introduction to USA Politics
Introduction to Comparative Politics
International Relations as a Major in Political Science
Importance of modern trade policy
Introduction to Journalism
Introduction to Writing a TV Script
Introduction of Microfabrication techniques
Introduction to Microeconomics
Interaction of Consumer and Firm Choices in Markets
Importance of corporate sustainability
Issues in International Monetary Macroeconomics
Introduction to Statistics and Data for Economics
Introduction to Data and Probability for Economics
Introduction to the Game Theory
Introduction to Econometrics
Introduction to Economic Information
Introduction to Market Equilibrium
Introduction to Economic Models and Application
Introduction to Empirical Research
Introduction to Econometric Data
Importance of Critical Thinking, Principles, and Goals
Introduction to Identification and Causal inferences
Introduction to Econometric Application
Intermediaries and Government in Financial Crisis
Importance and seven principles of quality management
Illiteracy in the USA
Introduction to Economics of Law
Introduction to Coase Theorem
Introduction to Social Choice and Incarceration
Intellectual Property and Product Liability
Investment in Human Capital
Introduction to Labor Markets
Imperfect Information in Insurance
Imperfect Information and Asymmetric Information
The Looming Energy Crisis in America
Top benefits of performance-based engineering
The More Languages You Know, The More Times You Are a Man
Things to consider while writing an Argumentative Essay
Top Ways to Improve Your Academic Writing Skills
Tips to Excel in Creative Writing
The origins of films in the early 19th century
Top career options in Architecture
The Elevator Pitch
Top finance trends 2020
The basic Structure and functionality of robots
The Way to Success
The election system of the President in the United States of America
Two-party System in United States of America
Top trends in urban design
The history and theory of African American filmmaking
Top benefits of creative writing
Tinnitus Guide: Common Symptoms and Treatment Options
The language of dance
The digital image processing management
Top famous politicians of the World
Top methods of political science!
The history of the feminist movement
The blood flow in cardiovascular system - Biofluid Mechanics
The best of Leonardo Da Vinci
The Structure and Function of Macromolecules
The structure of cell: a research on the bricks of the human body!
Tissue and organ construction: Adhesion and recognition between cells
The kinetics of the transformation processes
The Modeling of Biological Systems
Tips for writing a great thesis statement
The Defense mechanisms against infections
The impact of the technological innovations in medicine
Top journalism trends to know about
The relation between mass media & politics
Theranostics: Diagnosis and Care through Nanoparticles
The practical Applications of X-rays
The applications of Ultrasound in medicine
Transfer mechanisms of genetic information in Bacteria
The regulation of cellular metabolism in the diagnosis
The Principles of MRI Contrast agents
The technical basis of optical coherence imaging
The New Media: Emerging Trends
The Structure of Interest Rates and the Yield Curve
Technological perspectives and reflections of neural engineering
Types of bioreactors and their applications
The Role of Government Policy in Improving Economic Outcomes
Types of corporate responsibility
The Role of IMF in International Monetary Macroeconomics
Tools for investment decision making
The concept of Organizational Culture and its applications
The Conduct of Monetary and Fiscal Policy
The Basics of Financial Accelerator Models
Tips for labeling medical devices- Medical Entrepreneurship
The different medical imaging techniques
The Economics of Uncertainty – Introduction
Theories of Public Policy
The Game Theory in Social Media
The political theory of Thomas Hobbes
The Use of Law on Economics and Vice Versa
The Role of Internal Audit in Corporate Risk Management
What is a Definition Essay?
What are diagnostic essays?
What is the relation between art structural engineering?
What is a Narrative Essay
What are robotics and intelligence systems?
What are the benefits of studying health sciences?
What is artificial intelligence and why it matters?
What is comparative Literature?
Why study neuroscience
What is Wi-Fi and how does it works
What is French history famous for?
What are Humanistic Studies?
What is covered in Biophysics?
What is modern journalism?
What is Virtualization? Benefits & Applications
What are modern public relations?
What is plasma physics?
What is teacher preparation?
What is rapid prototyping for 3D printing?
What is contemporary European Politics?
Why should you learn American Ballet?
What is engineering physics?
What is the purpose of African American Literature?
Ways to learn the Rhythm
What is digital art used for?
What are Enzymes and how do they work
Who is the father of political science?
Why Study Political Science - Job?
What is the Philosophy of Feminism?
What is a quantum computer?
Ways B2B Startups Streamline Their Conversion Strategies
Why do biomedical signals need processing?
What are the long term effects of climate change?
Why study labour relations
What is Holoprosencephaly?
What is antisocial disorder?
What are the important principles of evolution?
What is the cytoplasm and its function?
What is biopolymers?
What Makes a Good Leader
Women empowerment in modern generation
What is the history of political thought?
What is Gene recombination
What is synthetic biology
What is business cost analysis?
What is Inflation
What are the consequences of unemployment?
What is lithotripsy and its types?
What is transition elastography?
What is the purpose of deep brain stimulation?
What is a Brain-Computer Interface (BCI)
What is neuroethics?
What is Market and Supply and Demand
What is optogenetics?
What are the techniques to record brain activity?
What happens if the interest rate increases?
What is immunotherapy?
What is the economic role of the financial market?
What are the factors behind illegal immigration?
What is the lymphocyte activation?
What is financial market and its types?
What is the structure of financial markets?
What are the methods of measuring business performance?
What is the Credit market?
What is business ethics and code of ethics
What are the Causes of financial instability?
What is MBA with Concentrations
What is regenerative medicine?
What is Population ecology?
What is Microfinance: evolution, and practices?
What is biotechnology and its applications?
What are Workplace diversity and its benefits?
What is the difference between a leader and a manager?
What Is Branding and best branding Business strategies?
Why are microelectronics important?
What are biologic drugs.
What is the Foreign Exchange market?
What is the role of scientific research in times of crisis?
What are the risks of international trade?
What is financial management?
What is gene therapy?
What is education economics?
What is regression analysis, and why should you use it?
What Is Technology Marketing And How Should It Work?
What is Management Accounting
What are the methods of valuation of companies?
What is Immune System and Immunotherapy?
What is big data analytics?
What is the 7 layers of OSI model?
What is Neuroplasticity?
What are Sculpture art and its types?
What are the different genres of films?
What is Transcranial magnetic stimulation (TMS)?