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Chapter 8 - Labor and Employment

The document discusses several economic theories related to labor and employment. It covers classical theories which state that wages are determined by the interaction of labor supply and demand and will settle at the subsistence level. The document also discusses Keynesian theory, which posits that unemployment can be addressed through inflation, government policies, and trade unions. Several graphs are included to illustrate the equilibrium point between labor supply and demand curves. The document also provides data on Philippine labor indicators such as unemployment rates and poverty thresholds by region.

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Chelsea Anne Vidallo
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165 views23 pages

Chapter 8 - Labor and Employment

The document discusses several economic theories related to labor and employment. It covers classical theories which state that wages are determined by the interaction of labor supply and demand and will settle at the subsistence level. The document also discusses Keynesian theory, which posits that unemployment can be addressed through inflation, government policies, and trade unions. Several graphs are included to illustrate the equilibrium point between labor supply and demand curves. The document also provides data on Philippine labor indicators such as unemployment rates and poverty thresholds by region.

Uploaded by

Chelsea Anne Vidallo
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as PPTX, PDF, TXT or read online on Scribd
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CHAPTER 8

LABOR AND EMPLOYMEN

QUILLOSA,
LEZIEL A.
• Human Resources are the key to economics developments

• Oil is very important economic resource. It becomes a useful


and precious resource only when man drills it out, refines it,
and distributes it to the end users.

• Labor is a very important resource. It is so important that


some noted economists postulate that labor is the source of
the important hypotheses and principles economists have
developed about labor.
LABOR PROBLEMS

Represents conflicts on social reality with social ideals that


normally rise out of employment.

Unemployment is a classic example.

Those who take part in employment relationship must work out


mutually satisfactory arrangements.

A mutually satisfactory arrangements spelled out from the very


beginning would lessen labor problems.
AREAS OF LABOR PROBLEMS

• Unemployment- if he is at least 15yrs old, willing and able to


work, but cannot find work.

• Underemployment- is an employed person who works for le


than 40hrs per week, despite the fact that he wants to work
more hours.

a) Visible underemployment- number of people working less


than 40hrs per week and wanting addtnl work
b) Invisible underemployment- number of people working 40h
or more per week and still wanting addtnl work.
nadequate wages- result from inability of wages to catch up with
ncreases in price.

overty threshold- minimum consumption of basic necessities ha


een estimated for families of given characteristics for the
hilippines, which a family considered poor.

OLE defined poverty as “the condition where a family receives


nsufficient income to purchase minimum nutrient requirements and
asic needs.”
Table 26
Annual Per Capita Poverty Tresholds and Incidences of
Population by Region for 2006 and 2009
INDUSTRIAL AND LABOR MANAGE
CONFLICT

• Prolonged strikes or lockouts could be


harmful to both parties
• Work stoppages could result in less
production, sales and income for both

ECONOMICS INSECURITIES

• A head of the family would be terrib


insecure if he is not certain that his jo
would last long enough.
• People have to provide funds for
emergency like illness, accidents, th
lockouts and strikes.
SUBSISTENCE THEORY OF WAGES

An explanation of the long-term trends in the price of labor.

e most prominent of the classical economist were:


Adam Smith
David Ricardo
Thomas Mathus
John Stuart Mill

These economists developed the classical school of thought and


advanced some explanations of the wage-setting process.
FACTORS AFFECTING THE THEORY

Laissez-Faire Theory
 “Don’t interfere, the world will take care of itself”.

Laissez-Faire is a French phrase which means “don’t interfere”


States that individuals ought to be free to act their own self-
interest.

Thomas Malthus
His analysis contributed an explanation of the long term chang
the aggregate supply of labor and the wages accompanying it
• Malthusian Theory is essentially a simply one.
• 2 general kinds of check that limited population growth:
preventive checks and positive checks.

Preventive- reduce the birth rate


Positive- increase the death rate

3. David Ricardo
• Wages, he concluded tended to equal the cost of
reproducing it.
• He maintained that the cost of subsistence would farm
products.
GRAPHICAL ILLUSTRATION:

The laissez-faire doctrine states An increase in the supply of labo


that the “market” will determine would shift supply curve.
the equilibrium price of labor.
The downward trend of the price Workers would be willing to acce
of labor will only stop at the level wages below subsistence level.
of subsistence.
Equilibrium price and supply
labor will only settle at
subsistence level.
CLASSICAL THEORY

The theory states that a firm in a competitive industry will


hire workers up to the point where the value of the marginal
product just equals the cost of the factor.

Profit maximization: w=pMn

Where: w= money wage rate


p= level of prices
Mn= the marginal physical product of labor
Real wage rate:

Demand function for Labor: Ld= D

Where: Ld= demand for labor


= real wage rate
Demand for Labor and Total Product

• The graph shows that if real wage rates are hig


as sahown in the number workers employed
would only be placed at L1.

• If less workers are employed, then they can on


produce a limited amount as shown by the Tp1
curve in figure 55.

Supply function of Labor: Ls= S

• The supply curve is positively sloped.


• It is an increasing function of the real wage ra
55)
Equilibrium Point

• Where both employers and workers agree on wage rates, is


reached at the interaction of the demand and supply of labor.
Changes in the Supply Curve
THE KEYNESIAN THEORY

• John Maynard Keynes advanced his full employment theory.

• His “General Theory of Employment, Interest, and Money”


published in 1936 provides the basic analysis on which the
theory is based.

• He believed that a wage cut was theoretically equivalent in it


effect to fall in the rate of interest.
Labor Suppy is a Function of Money Wages

• J.M. Keynes assumed that work


prefer to make their decisions i
terms of money wage.
The Cure to Unemploym

• Inflation
• Government
• Trade Unions
Table 27
Selected Labor and Wage Indicators (for periods indicated)
urdened by Crisis

With the government resources getting


scarce and misallocated less and less money
becomes available to address the people
growing needs

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