Labor Economics
Labor economics is the branch of economics that studies the functioning of the labour market, the behaviour of employers and workers, and the determination of wages, employment, and working conditions. It applies the tools of microeconomics and macroeconomics to analyse how labour is supplied by workers and demanded by firms.[1]
Subject matter
Labor economics examines a wide range of issues:
- How are wages determined, and what causes wage differences between workers and jobs?
- What determines the level of employment and unemployment?
- How do workers decide whether to work, how much to work, and what occupations to enter?
- How does education and training affect earnings?
- How do unions, minimum wages, and labour laws affect outcomes?
Key concepts
| Concept | Description |
|---|---|
| Labour supply | The number of hours workers are willing to work at a given wage. |
| Labour demand | The number of workers firms wish to hire at a given wage. |
| Human capital | The skills and knowledge that raise workers' productivity and earnings. |
| Compensating differentials | Wage differences that offset the non-monetary features of jobs. |
| Unemployment | The state of being without work while actively seeking it. |
Areas of study
Labor economics encompasses the analysis of wage determination, labour mobility, the economics of education, discrimination, trade unions, and labour market policy. Empirical labour economics relies heavily on econometric methods to estimate causal effects.[1]