Who is Affecter in Labor Market - Essay Example

 WHO IS AFFECTED IN LABOR MARKET? Introduction Capital, labor, entrepreneurship, and natural resources are the main factors that influence and contribute to economic growth in not only the United States, but in all countries. Labor comprises the workforce that produces the goods as well as services in an economy. Capital refers to the machinery, equipment, office buildings and the manufacturing plants required in generating goods and services.1 Natural resources include land, water, mineral and energy required in the production process. Entrepreneurship generates the unique ideas and innovations needed to create novel processes. All these components are employed in producing the GDP of a country. Without the components, a country would lack the industry and business to satisfy the needs and wants of its citizens. As the main bank of the nation, the Federal Reserve considers the availability of all resources to determine national monetary policy.2 The Labor Market and the Economy Labor implies the workforce needed to produce goods and services in an economy. There needs to be market for services provided. The labor market is unique in the sense that it comprises people who lease their time to enterprises for a given period. The labor they provide is exchanged with wages; in other words, these people trade their idle hours for paid time to that they can earn a living and buy goods and services.3 In turn, businesses utilize the labor to generate goods and services that consumers demand. As mentioned previously, capital, labor, entrepreneurship and natural resources are the major components required in generating good and services. The quality and quantity of labor that people provide is a significant factor in influencing the rate of growth and level of production of an economy. Employed people, job seekers and enterprises looking for workers constitute the labor market.4 The contact between the suppliers of labor and businesses seeking human capital determines the salaries and wages that the employees are paid. It also dictates how many people will be employed. A major feature of the labor market is the role of the unique abilities and skills of everyone. Unique talents can be enhanced and changed through training and education so that the labor force becomes an evolving talent pool that businesses hire. Effective use of skills and training of people to meet emerging demands in the market makes the process of production more efficient. Another significant aspect of the labor market is the flexibility of its workforce.5 Theoretically, U.S. citizens can flexible enough to take on new jobs. Such mobility is important and comes in handing in matching skills and job opportunities.6 Practically, though, people may be reluctant to move to new locations in search of jobs or they may be reluctant to train for new jobs. As such, labor market mobility and economic output slow down, jobs go unfilled, and people remain jobless. The labor market attempts to match job seekers with available opportunities. Employees search for jobs that meet their financial needs as well as other interests while employers look productive workers who are ready to accept their offers. Some economic factors may make it difficult for businesses and people to match up their searches in the job market. In fast-growing economies, for instance, some businesses may find it difficult to find people with the skills they need so that they fail to meet demand. This can lead to a rise in wages in some industries. Similarly, an economic slowdown results in unemployment and declining wages especially in sectors where demand is low. What Affects the Labor Market? Everything that affects the economy also influences the labor market. As such, variations in demand for services and goods, population size, as well as the minimum-wage rate, can substantially affect the labor market. Perhaps the dynamics of the economy have the greatest impact on the labor market. Rapid growth in economy initiated by swelling demand for goods and services create many opportunities for employees and job seekers and vice versa. Thus, when demand for goods and services decline, businesses must reduce production and lay off employees. Unemployment is a grave economic concern in the job market.7 As such, instituting policies aimed at reducing unemployment is often a complicated process. This is especially true because it is difficult to define unemployment. Economists do recognize three major types of unemployment: structural, frictional, and cyclical. Frictional unemployment is associated with regular income in the job market. Structural unemployment is derived from mismatches in labor market. Cyclical unemployment is influenced by changes in the commerce cycle when a decline in the economy causes a decline in demand for services and goods.8 Cyclical unemployment attracts the greatest attention from economic policymakers. An economy is considered to be at full employment when structural and cyclical unemployment is too low. When the economy operates at full employment, a further drop in employment rate puts much pressure on salaries and prices, which ultimately causes inflation. Thus, it is normal for an economy to witness instances of unemployment as individuals move into or out of the labor market. A mobile labor force helps in keeping unemployment low. As such, it is significant that people relocate to where jobs are available.9 Countries with low mobility such as England witness high unemployment trends. Changes in technology and productivity growth are also important factors to consider in the labor market. A possible impact of technology may be the displacement of workforce in industries that use more capable production techniques. In other words, technological change has adverse impacts on employees in occupations rendered obsolete by novel technology, and it can have positive impacts on employees trained for the emerging technology. Overall, technological advances increase productivity and wages for workers.10 How Government Affects the Labor Market The government of the United States influences the job market through actions such as setting a minimum wage, paying unemployment insurance benefits, raising or lowering income tax, as well as establishing rules for labor unions.11 The government may also initiate special programs to create temporary jobs when unemployment is abnormally high. Unemployment insurance pays wages for a given duration of time for people who were recently laid off and are seeking jobs. This insurance may sometimes make people be choosy about jobs because they receive a form of income. 12 Generally, the higher the benefits, the longer these people take to accept a new job opportunity. The federal government of the United States sets the minimum wage that employers are required to pay. A number of people benefit from a higher minimum wage while others,-especially teenagers and people with low skills can be excluded from the labor market as employers cut down costs and instead hire fewer people.13 A rise of a decline in taxes affects the market subtle ways: lowering income tax can encourage people to be hardworking and get more income. Similarly, increasing tax may make people work less as most of their labor goes to taxes.14 Although people may want to work less especially if they receive “little” after-tax salaries, they may work harder so that they earn enough wages to meet their expenses. Labor can also be influenced by government infrastructure and investment such as roads, schools, and parks, because such amenities be just as influential as tax rates in deciding where people and businesses locate.15 The amenities also have a significant impact on wages paid to the workers since people may want to accept lower wages provided they can live in a location that offer them what they value in terms of their preferences. Conclusion This paper has investigated key components of an economy such capital, labor, entrepreneurship, and natural resources and how they influence and contribute to economic growth in various countries. The labor force has been singled out as an important factor that is influenced by many aspects such as demand and supply, technology, and the government policies. All these factors come into play in determining how, for instance, an employee will be paid. Countries such as the United States set up a minimum wage to cushion employees from low wages. Yet, other countries have unemployment insurance benefits. Regardless of the initiatives a country undertakes, labor market works in such a way that the employer must provide wages that meet the skills and talents of the employee. Overall, this topic was informative. Bibliography Bertola, Giuseppe, Francine D. Blau, and Lawrence M. Kahn. Comparative analysis of labor market outcomes lessons for the US from international long-run evidence.Cambridge. MA: National Bureau of Economic Research, 2001. http://papers.nber.org/papers/w8526. Freeman, Richard B. Labor market institutions around the world. Cambridge: Mass National Bureau of Economic Research, 2007. http://papers.nber.org/papers/w13242. Guasch, J. Luis. Labor market reform and job creation the unfinished agenda in Latin American and Caribbean countries. Washington, D.C.: World Bank, 2009. http://site.ebrary.com/id/5007385. Mulligan, Casey B. The redistribution recession: how labor market distortions contracted the economy. New York: Oxford University Press, 2012. Polachek, S. W., and Konstantinos Tatsiramos. Factors affecting worker well-being: the impact of change in the labor market. New York: Oxford University Press, 2014. http://search.ebscohost.com/login.aspx?direct=true&scope=site&db=nlebk&db=nlabk&A N=908916. Read More