Labor economics is a branch of economics that seeks to examine the functioning and dynamics of wage labor markets. Work is a measure of the work done by human beings. Some economists refer to skills and knowledge as human capital.
Historically, economists viewed labor markets as being similar to other markets, such as money and product markets, in that the forces of supply and demand also determine the dynamics of labor. . The labor market, however, is somewhat different from the product market. In the product market, when the price increases, more products are produced in the long run. However, the labor supply is almost fixed since human beings have a fixed time which is 24 hours a day. With the increase in wages, people tend to devote more time to leisure activities and work.
The concept of labor economics is widely used in personal economics and in the human resource departments of organizations. This is practically applicable within the individual and throughout the economy. This is because workers do not move smoothly between companies. Wage rates are also, to a greater extent, set by individual firms and not necessarily on the basis of
Evolution over time
The study of labor economics has evolved from monopsony models in microeconomics to more complex environments involving many employees. The use of technology in the workplace has further complicated the subject. Complex work models like moonlighting and part-time work are now a reality in today’s work environment.
Praise and criticism
The study of labor economics has been the subject of a growing wave of criticism. Some economists have argued that the labor market is such a complex issue that has many different dimensions and cannot be explored using price alone. It also involves the psychological aspect of the individual, religion and family background. Another problem is ignoring unpaid work. This includes interns and unpaid volunteers whose contribution is crucial in an economy. Domestic production which involves household maintenance, childbirth, care for the sick and the elderly, as well as breastfeeding are all chores that are neglected in the labor economy. The question of wage slavery was also the subject of strong criticism from the socialists. Wage slavery is a situation where a person performs a task because of the financial gains he will derive from it and not because of passion or his free choice.
It has also been argued that the study makes very unrealistic assumptions. The hypothesis of perfect information by the employer is totally unrealistic because no employer can have absolute knowledge of the labor market. Another assumption is that employees have the ability to move smoothly between companies. This is totally wrong as different companies have different employee needs and employee on the other hand, employees have varying skills and expertise.
On the other hand, proponents of this study have argued that labor economics is important in determining the wages to be paid to workers. External factors that can affect work are also studied, which helps to create a conducive working environment.