LABOR AND

EMPLOYMENT
GROUP 1
HUMAN RESOURCES
These are the key to economic development. What the people consider to be important
goals in their lives how they think about work, how creative or skillful they are, how
intelligent and motivated they are will determine whether their country will develop or not.

OIL
is a very important economic resource, but as long as it remains in the bowels of the earth,
it just remains dormant.
LABOR
is a force of production that refers to the work people do to
produce goods and services. It is a measure of the work done by
human beings. One of the four factors of production.
KINDS OF LABOR
• Manual Labor this type of labor mostly involved exertion of physical efforts, specifically the use of
brawn and muscles.
• Clerical Labor is considered as next higher in order than manual labor. Most parts of the clerical work
are done with physical efforts, exertion is not that great than in manual labor.
• Professional Labor the professions includes the following: physicians, lawyers, engineers, chemists,
teachers, nursers, and others. Most of the professions require sufficient training and experience.
• The Labor of Management managers of all kinds and types performs functions which may be referred
to as labor of management. Included under this class are frontline managers like supervisors, and
foremen, middle manager like branch and area manager.
 LABOR PROBLEMS
Labor problems represents conflict and social reality with social ideals that
normally rises out of unemployment. A problem would exist if people could not
find work that they had been preparing for. Unemploye people are, thus, considered
part of the labor problem.

AREAS OF LABOR PROBLEM

1.UNEMPLOYMENT
2. UNDEREMPLOYMENT
3. INADEQUATE WAGES
4. POVERTY
5. INDUSTRIAL AND LABOR
MANAGEMENT CONFLICT
6. ECONOMIC INSECURITIES
 AREAS OF LABOR PROBLEM
Visible Underemployment is
defined as the number of people
UNEMPLOYMENT UNDEREMPLOYMENT
working less than 40 hours per
A person is considered week and wanting additional
worK.
unemployed if he is at least 15
years old, willing and able to
work but cannot find work.
Invisible Underemployment is
defined as the number of people
An under-employed is an working for 40 hours or more per
employed person who works week and still wanting additional
for less than 40 hours per week, work.
despite the fact that he wants to
work for more hours.
INADEQUATE
WAGES
Wages and earnings that fail to
provide a minimum of
comfortable living can be
regarded as inadequate.

POVERTY
The Department of Labor and Employment (DOLE)
defined poverty as the condition where a family receives
insufficient income to purchase or meet the recommended
minimum nutrients requirements and basic needs in
clothing, education, medical care, housing, and fuel.
 INDUSTRIAL AND LABOR MANAGEMENT CONFLICT

When workers are on a strike, or when

employers results to lockouts, inconvenience
between the two groups can follow.
Economic Insecurities
Threats of interruptions in
earnings or in one's work can
be regarded as a serious
problem. A head of the family
would be terribly insecure if he
is not certain that his job would
last long enough.
SUBSISTENCE THEORY OF WAGES
-an explanation of the long-term trends in the price of labor

The most prominent of the classical economist were

1.Adam Smith
2. David Ricardo
3. Thomas Malthus
4. 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 itself”
it is a French phrase which means “don’t interfere”, it states that individuals ought to be free to act their own
self-interest

THOMAS MALTHUS
his analysis contributed an explanation of the long term changes in the aggregate supply of labor and the
wages accompanying it
• Malthusian Theory is essentially a simple 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

DAVID RICARDO
• wages, he concluded tended to equal the cost reproducing it
• he maintains that the cost of subsistence would farm products
 The downward trend of the price of labor
will only stop at the level of subsistence.

An increase in supply of labor would shift

supply curve
 workers would be willing to accept wages below
The downward
subsistence level
trend of the price
of labor will only
stop at the level
of subsistence.

Equilibrium price and supply and labor

will only settle at subsistence level
 CLASSICAL THEORY
This theory states that a firm in competitive industry will hire workers up to the point where the
value of marginal product just equals the cost of factor.

PROFIT MAXIMIZATION: w = pMn

where: w = money wage rate

p = level of prices
Mn = the marginal physical product of labor
For real wage rate, the equation can be written as:
w/p= Mn
THE DEMAND FOR LABOR

Ld = D (w/p)
where: Ld = demand for labor
(w/p) = real wage rate
Units of labor Quantity of units Marginal product Price of Marginal revenue Wage
produced of labor producing a product of labor
product

1 10 0 10 0 80

2 18 8 10 80 80

3 23 5 10 50 80

4 27 4 10 40 80
 DEMAND FOR LABOR AND TOTAL PRODUCT

the graph shows that real wage rates are high, demand for labor will
only be low because the cost of hiring workers are expensive, less
workers hired would therefore mean less output. If real wage rates are
low, more workers can be hired. With more workers hired, more output
can be produced.

THE SUPPLY OF LABOR

Ls = D (w/p)

where: Ls = supply of labor

(w/p) = real wage rate

From the foregoing relationships, we can see that the supply of

labor is function of real wage rate. In contrast to demand of labor
which has a negative slope, the supply curve is positively sloped.
 THE EQUILIBRIUM POINT
Where both employers and workers agree on wage rates, is reached at interaction of demand and
supply of labor as shown:
 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 its
effect to fall in the rate of interest
LABOR MARKETS ARE NOT SELF-CORRECTING
The Keynesian theorists however argue that aggregate of
labor market is not self-correction. They advance two
reasons:
• The forces causing and maintaining full employment is
largely outside of labor markets
• Self-correcting mechanism has not provide effective
LABOR SUPPLY IS A FUNCTION OF
MONEY WAGES

J.M Keynes assumed that workers prefer to make

decisions in terms of money wage

THE CURE TO UNEMPLOYMENT

1. inflation
2. government
3. trade unions
Thank
you