Lecture 2. Lecturer: Dr. Priscilla T. Baffour. Priscilla T. Baffour 2016/17 1

Transcription

1 Lecture 2 Lecturer: Dr. Priscilla T. Baffour Priscilla T. Baffour 2016/17 1

2 Labour market institutions Labour market institutions these are laws, rules, policies, practices, norms and conventions external to specific individuals who are engaged in the exchange of labour but guides and further or constrain their actions in the market. Egs. Industrial relations and labour laws, labour unions, employers association and minimum wage legislation etc. Priscilla T. Baffour 2016/17 Slide 2

3 Labour force Labour force all individuals over 16 years of age who are employed, actively seeking work, or expecting recall from layoff. People who are not employed and are neither looking for work nor waiting to be recalled from layoff by employers are not counted as part of the labour force. This category consists of discouraged workers and students. Total labour force consists of the employed and the unemployed Priscilla T. Baffour 2016/17 Slide 3

4 Labour force (cont.) Employed: people who have entered into employment contracts with employers and are waiting to be paid. Includes formal and informal workers. Unemployed: people who are eligible to work, not working, seriously looking for work and are available for work. This category includes; Individuals who have been laid off Those who have been fired or quit their jobs and cannot find a job Those entering and re-entering the labour market but have not yet found jobs. (fresh graduates, women who take time off he labour market). Priscilla T. Baffour 2016/17 Slide 4

5 Labor Force Status of the U.S. Adult Civilian Population, April 2010 (seasonally adjusted) Priscilla T. Baffour 2016/17 5

6 Labour force (cont.) Labour Force Participation Rate: This is the proportion of the labour force to the entire population. LFPR = Labour force X 100 Population Unemployment Rate = Unemployed X 100 Labour force Priscilla T. Baffour 2016/17 Slide 6

7 Labor Force Participation Rates by Gender, Priscilla T. Baffour 2016/17 7

8 Unemployment Rates for the Civilian Labor Force, Priscilla T. Baffour 2016/17 8

9 Relationship among Wages, Earnings, Compensation, and Income Priscilla T. Baffour 2016/17 9

10 The Markets in Which Firms Must Operate Priscilla T. Baffour 2016/17 10

11 Characteristics of The Ghanaian Labour Market Agricultural employment constitute about 48% to total employment in the labour market. Government, unions and employers (Tripartite committee) play a major role in minimum wage determination. Substantial amount of underemployment in the labour market. Unemployment is high in the urban labour market, particularly among young people due mainly to rural urban migration. Priscilla T. Baffour 2016/17 Slide 11

12 Characteristics of The Ghanaian Labour Market cont. Participation rate of men is observed to be greater than women due to low education and care giving activities at home. Earnings are generally higher in the private sector than in the public but higher job security in the public sector. Women generally earn less than men in the labour market. Priscilla T. Baffour 2016/17 Slide 12

13 Labour Demand Priscilla T. Baffour 2016/17 13

14 Demand for Labour Demand for labour the level of employment desired by the business This is derived demand labour is hired not for direct satisfaction but for contribution towards production. The analysis of the demand for labour will be conducted in two time periods (the short run and the long run). Short run: the period of time within which the firm is locked (faced) with a fixed amount of capital (plant & equipment) and for that matter labour becomes the only variable input. Priscilla T. Baffour 2016/17 Slide 14

15 Demand For Labour (cont.) Long run is the period of time within which all factors of production are variable. The length of time varies from industry to industry. The firm level short run demand for labour is simply the employment decision of the firm in the short run. Priscilla T. Baffour 2016/17 Slide 15

16 Demand For Labour (cont.) Assumptions The firm only thinks about maximising profit. Labour is the only variable input in the short run, all other input are fixed. Wages are the only cost of labour and labour is homogeneous. The firm operates in a perfectly competitive product and labour markets; hence it exhibits all the characteristics of a perfect competitive market (prices and wages are given). Priscilla T. Baffour 2016/17 Slide 16

17 Demand For Labour (cont.) The employer produces a given level of output Q by combining certain units of labour L and capital K For competitive markets, economists link the demand for labour by the individual firm to the marginal value product (MVP) of labour. The marginal value product is the value added to production by employing one more person. It is calculated as: MVP=MPP x P Priscilla T. Baffour 2016/17 Slide 17

18 The Marginal Product of Labor in a Hypothetical Car Dealership (Capital Held Constant) Priscilla T. Baffour 2016/17 18

19 Demand for Labor in the Short Run (Real Wage) Priscilla T. Baffour 2016/17 19

20 . Market/Industry Labour Demand W W1 Firm A (a) Curve W1 Firm B (b) W2 W2 L DA L DB 0 E E L A1 L A2 L B1 L B2 The Market/Industry W1 W2 X Y L MI L M2 E L DM Priscilla T. Baffour 2016/17 20