Overview of the Labor Market

Labor: input into production of goods and services

Labor market: Buyers and sellers of labor

Buyers (demand side) 7 million firms

Sellers (supply side) 150 million

142 million employees

Unique features of labor market

1. Can’t buy or sell people, rent services2. People care, with whom they work3. Long-term attachments

1. No explicit contract2. Markets clear slowly

4. Market definitions1. Geography2. Skill-occupation3. industry

Market clearing

How do we assign 142 million people to 7 million employers?

Wages

• Common signal to supply-side and demand side– Demand-side: input price– Supply-side: source of purchasing power

Real wage: purchasing power of wage

= wage in current $/price level

Meisenheimer , Joseph R. “Real compensation, 1979 to 2003: analysis from several data.sources.” Monthly Labor Review 128 (May 2005): 3-22

Wages are 72% of total compensation

Meisenheimer , Joseph R. “Real compensation, 1979 to 2003: analysis from several data.sources.” Monthly Labor Review 128 (May 2005): 3-22

Benefits have risen faster than wages—due largely to cost of maintaining health insurance

Overview of the Labor Market

Labor market:

Demand-side: firms

Supply side: labor force

Common signal: Wage

Aim: allocate workers to firms

Sincavage, Jessica R. “The labor force and unemployment: three generations of change” Monthly Labor Review 128 (June 2004): 34-41.

Application : Baby-boom and the labor market

http://www.census.gov/ipc/prod/97agewc.pdf

http://www.census.gov/ipc/prod/97agewc.pdf

http://www.census.gov/ipc/prod/97agewc.pdf