1. By: JC, M.B.A.9/12/2014 1

2. Labour One of the factors of Production, withLand, Capital, and Enterprise. Supply is determined by number of ABLEpeople in the population and theirwillingness to work. Managed by DOLE. Demand is determined by the health ofthe economy and firms, labour laws andregulations, PRICE and supply of otherfactors of production.9/12/2014 2 3. Scope of the Labour MarketsMarket-an area where buyers andsellers are in sufficiently closecommunication that price tends to bethe same throughout the area.International MarketNational MarketLocal MarketInternal MarketLabour Transfer9/12/2014 3 4. Simplified Market(Competitive Market)1. There are many workers in the market andalso many employers, so that no one hasappreciable influence on the marketwage.2. Workers and employers are free to enterand leave the market at will.3. There is no organization on either side f themarket.4. Workers and employers are well informed.5. Economic motivation is dominant.9/12/2014 4 5. Additional...1. The attractiveness of a job is solely measuredby its hourly wage rate. Other job conditionsare taken as given and constant.2. All job vacancies are filled through the market.We ignore the fact of internal hiring.3. Workers are interchangeable in the eyes of theemployer and are of equal efficiency. The Method of Ceteris Paribus EverythingEqual9/12/2014 5 6. Additional... Theory of Marginal Productivity means profitmaximising firm will hire additional units ofvariable factor up to the point of MRP=MFC. Itmeans in perfect competition, each factor willreceive payment equal to the value of itsmarginal product Marginal Factor Cost is total cost cause byemploying one more or less Marginal Revenue Product is the change inrevenue cause by employing one more or less9/12/2014 6 7. Market DemandSource:http://wps.prenhall.com/bp_hubbard_micro_1/36/9318/2385572.cw/index.html9/12/2014 7 8. Market Supply Source:http://upload.wikimedia.org/wikipedia/commons/1/1a/Labour_supply_small.png9/12/2014 8 9. Market Supply Source:http://www.thomascarrollandassociates.com/factor-markets-and-income-determination-chapter-8.html9/12/2014 9 10. Market Supply Changessource:http://img.sparknotes.com/figures/3/38bf88807fd6b1e5beccc807f687acf4/choc4.gif9/12/2014 10 11. Market EquilibriumSource: http://www.dineshbakshi.com/images/stories/economics_diagrams/equilibrium-level-of-employment-small.gif9/12/2014 11 12. Measuring Labour Supply Labour is the totality of people counted in theworkforce. This is the human capital of a nation.Also a number of worker-hours available forproduction over a period of time. Participation Rate-the proportion of thepotential workforce that is working or activelyseeking work. Census measures the workforce. Newly gradsand people who just turned 18 are counted intothe workforce.9/12/2014 12 13. Labour Force Survey By PhilippineStatistics Authority Survey sample of 41,000 households Performed on quarterly basis Household- aggregate of people living togetherin one roof and not necessarily related. In the Labour force or Economically active are15 years old and above employed or not. Unemployed- looking for a job but cant findany. Out of Labour force-no job or business and notactively looking9/12/2014 13 14. Continuation... Underemployed-workers wanting to work morehours or looking for a second job but cant findany. Works less than 40 hours a week. Sampling-a population is selected in everyeconomically significant baranggay.Baranggays that are far and expensive to reachare not counted. Current Labour Force: TABLE 1 PercentDistribution of Population 15 Years Old and Overby Employment Status by Sex and Age GroupJanuary 2014.pdf9/12/2014 14 15. 9/12/2014 15 16. Simplest Model of Labour Supply Traditional analysis of labour supply viewsworkers as faced with market wage and withchoosing the work week that will yield maxsatisfaction at that wage. Individual decision: working hours or leisurehours. Income effect- reduces labour supply when anindividual has more income. Substitution effect-increases labour supply.Happens when cost of leisure is too much ormotivation is increased in income.9/12/2014 16 17. Simplest Model of Labour SupplyPreference Income versus Leisure9/12/2014 17 18. Simplest Model of Labour Supply9/12/2014 18 19. Simplest Model of Labour Supply9/12/2014 19 20. Simplest Model of Labour Supply9/12/2014 20 21. Wage Differentials Under what conditions would wages for all jobsbe equal? Follows the wage, supply, and demand oflabour. Barriers to the mobility of labour. Non Competing Groups-jobs requiring specificskills and abilities. Government labour laws and regulations.9/12/2014 21 22. Imperfections in Labour MarketDemand Side Monopsony is a single buyer of labour services ina particular labour market. Oligopsonies are employer organizationcollectively negotiating the conditions ofemployment and wages for a member firm.Supply Side Trade Unions-negotiate wages and employmentconditions (Denmark). Govt labour laws andregulations.9/12/2014 22 23. Disequilibrium in the LabourMarket Happens at any wage rate. Friction in labour market preventing the balanceof supply and demand. Rigidity of Wages Labour as Heterogeneous Factor-labour is acollection of different skills, education, training,experience and so consist of non competinggroups. Internal Labour Market Information Cost9/12/2014 23 24. Theory of Search Labour buyers and sellers engage in a process ofsearch to strike the best possible bargains aboutwages, terms and conditions of employment. Thelonger the search, the higher the cost and usually thiscost is ignored. Labour buyers spend a lot in recruitment process(advertising, screening, training, interview process,recruitment firm) Labour sellers have opportunity costs. Employedworker looking for a new job has a cost called lostleisure time. Discouraged Worker Hypothesis explains a workerwithdraws from the labour market for not findingwork.9/12/2014 24 25. Equal Pay Movement to promote equal pay betweengenders. It also aim to provide both gender of equalopportunities. Differences still occur: Women are concentrated in industries where unionsare weak. Traditions of womens work and mens work. Profit seeking firms prefer employees who can staylonger after training to serve as human capital.Women tend to lay low from their careers to focus onfamily unlike men.9/12/2014 25 26. Philippine Set-up Wage determination is managed by NationalWages and Productivity Commission. Each region in the country have its own regionalwage board. Wage increase can only take place once ayear after an increase is issued. simplified_Q_A Wage and Labor.pdf stat_current_regional wage.pdf9/12/2014 26 27. Unemployment The number of unemployed consists of all thosepeople in a country who are willing and able towork but are unable to find a job. Measured by Philippine Statistic Authority on aquarterly basis. Current Employment Data: TABLE 2 PercentDistribution of Population 15 Years Old and Over byEmployment Status by Region and Sex January2014.pdf TABLE 17 Percent Distribution of Unemployed PersonsLooking for Work by Number of Weeks Looking forWork, by Sex and Region January 2014.pdf9/12/2014 27 28. Source: http://www.tradingeconomics.com/philippines/unemployment-rate9/12/2014 28 29. Actual number of job vacancies9/12/2014 29 30. PHL and ASEANCountry 2014Brunei Darussalam 2.9Cambodia 0.6Indonesia 5.9Lao People's DemocraticRepublic 1.6Malaysia 3.3Myanmar 3.7Philippines 7.5Singapore 3.6Thailand 0.9Viet Nam 2.3Source: http://www.philstar.com/headlines/2014/05/02/1318587/philippines-jobless-rate-highest-southeast-asia9/12/2014 30 31. According to Social WeatherStation... A Social Weather Stations survey showed morepeople are unemployed in the second quarter.But a separate survey by the Department ofLabour shows a different result. Current Unemployment rate is 25.9% in Q2 of2014. Joblessness Vs Unemploymenthttp://www.abs-cbnnews.com/video/business/08/19/14/ph-unemployment-rate-rose-259-pct-q29/12/2014 31 32. Uses of Unemployment Rates A Business Cycle Indicator-when economy isgood it means employment rate is at a low rate.Opposite happens during recession. Ifemployment rate is seen rising, it may indicatethat economy is recovering. A Hardship Indicator-related to poverty since aperson or household may have no income atall.9/12/2014 32 33. Uses of Unemployment Rates A Measure of Economic Performance-costs interms of output and income. Output (GNP) isreduced when there is high unemploymentcause there is no/reduced input (income spentby households). Target of Macroeconomic Policy-uses fiscal andfinancial power to either stimulate or restrainteconomic activities. Concept of Non-acceleratinginflationary rate (usually at 5% or6%).9/12/2014 33 34. Costs of Unemployment Social Costs-effects on an individual who isunemployed and having a hard time looking fora job. Economic Costs- it is costly for a government tohave reduced outputs due to unemployment.There is an output gap. Resources are wasted.Some resources are spent on economic stimulus.9/12/2014 34 35. Costs of Unemployment Cost to Exchequer- Benefits paid to an unemployed. The loss of tax revenues (income tax and VAT) The loss of national insurance contributions. Voluntary Unemployment-workers refuse toaccept a cut in real wages. Involuntary Unemployment- workers unable tofind a job.9/12/2014 35 36. Flows Through The Labour Market9/12/2014 36 37. Types of Unemployment Frictional Unemployment-arises from normalturnover in the labour market and the fact thatfinding jobs takes time. Structural Unemployment-job mismatch Deficient Demand Unemployment-arising from adecrease in total demand for labour.9/12/2014 37 38. The Differential Impact ofUnemployment Analysis of Unemployment rate record. Class participation TABLE 1 Percent Distribution of Population 15 Years Oldand Over by Employment Status by Sex and Age GroupJanuary 2014.pdf TABLE 2 Percent Distribution of Population 15 Years Oldand Over by Employment Status by Region and SexJanuary 2014.pdf TABLE 15 Percent Distribution of Unemployed Persons byHighest Grade Completed by Sex and Age GroupJanuary 2014.pdf TABLE 17 Percent Distribution of Unemployed PersonsLooking for Work by Number of Weeks Looking for Work,by Sex and Region January 2014.pdf9/12/2014 38 39. Labour Issues The Twentieth CenturyThe Great Depression and World War 2The Post War BoomThe Period since 1970Asian Economic Crisis of 1997The fall of Asian CurrenciesWTO establishmentGlobalization9/12/2014 39 40. Labour Issues: Current and FutureIssues-Labour Supply Developing Nations and China Gender equality Eliminating Barriers in Recruitment and Hiring Addressing emerging and developingdiscrimination issues. Enforcing equal pay laws Migrant workers Low birth rate in developed nations Terrorism Job mismatch9/12/2014 40 41. Labour Issues: Current and FutureIssues-Labour Demand The rise of start ups and entrepreneurs The booming trend of Business ProcessOutsourcing Technological advancements and acquisitionof highly skilled individuals. Job mismatch Mass production to flexible production The slow economic recovery of USA andEurope. The emergence of Chinese firms. World poverty, terrorism, diseases.9/12/2014 41 42. Labour Issues: Current and FutureIssues-Human Capital The need to acquire new knowledge and skillsto secure jobs Chinese human capital is so huge and cheap More multi-skilled workers are needed The need to be multi lingual The right education and training for the right job(job mismatch) Basic education and Higher education schoolsresponse to the changing labour market andeconomy9/12/2014 42 43. The PLEP 2011 to 2016 The Philippine Labor and Employment Plan 2011 to2016: Inclusive Growth through Decent andProductive Work. Used to address the current labour and employmentissues in medium term. Spearheaded by NEDA andDOLE. Employment indicators: Eradication of ExtremePoverty and Hunger; Achieve full and productiveemployment and decent work for all; Promotegender equality and empower women; Eliminategender disparity in primary and secondaryeducation.9/12/2014 43 44. The PLEP 2011 to 2016Some strategies include: Improvement of human capital througheducation and training. Promoting entrepreneurship Addressing job and skill mismatch by improvingthe processes of labour market informationexchange and cooperation between employers,government, and academe. Adopting reforms in employment facilitation. Promoting better business environment. PLEP 2011.pdf9/12/2014 44 45. Sources:Lloyd G. Reynolds, Stanley H. Masters, andColletta H. Moser. Labor Economics and LaborRelations, 1998. 11th Ed.Philip Hardwick, John Langmead, and BahadurKhan. An Introduction to Modern Economics,1998. 5th Ed.9/12/2014 45 46. Thank you.9/12/2014 46