Labor market: formation, features, supply and demand

2024 Author: Henry Conors | [email protected]. Last modified: 2024-02-12 02:40

In the system of economic relations it is impossible to do without such a specific commodity as labor power. The labor market (as this component of the economy is most often called) is the most important sphere of the political and social life of society. It is here that employment conditions are fixed and wage rates are worked out. Naturally, the labor market is based on supply and demand, like any other. The features of its formation will be discussed in the article.

About supply and demand

The demand for labor in the labor market appears as a need to fill vacancies and perform certain tasks. Between applicants in most countries there is a competitive struggle for each paid place. The supply on the labor market appears in the form of the presence of a free working population or employed individuals, but who want changes for the better and are looking for another, more profitable position. Not only does an active society compete for the best conditions, but there arecases when employers are trying to get specialists of certain professions that are beneficial in terms of quality, less often quantitative, they are looking for exactly what they need.

The demand for labor in the labor market affects the dynamics of employment, and most importantly - the state of the economy in each phase of this cycle. Scientific and technological progress also makes big adjustments that increase the need for an active population. Supply, as well as demand, is influenced by a number of factors. These are moments of migration policy, demography - everything that characterizes the economic activity of certain groups of the population that affect the supply in the labor market. It is the current state of the economy that affects demand. The population, for example, in Russia is economically active in that part that provides the supply of labor for production needs. In terms of number, this category of people in the labor market includes the unemployed, the active, and the self-employed.

About forms of employment

People who are employed under a contract or a civil labor contract, in enterprises (the form of ownership is not important here), in any other paid service, those who are engaged in entrepreneurship, are classified as employed. Also, this group in the labor market includes: those who provide themselves with some kind of activity on their own (self-employed), military personnel holding positions in the internal affairs bodies, those who are educated full-time in vocational schools who are not currently working for a good reasonretraining, temporary disability, vacation.

The unemployed are fully able-bodied people who have no earnings, who have registered with the employment authorities, who are looking for vacancies and are ready to take on any duties. However, the supply of labor in the labor market is excessive, and therefore they fail to do so. Combating such a socio-economic phenomenon as forced unemployment is not possible even in countries that are very developed from a material point of view.

The unemployment rate is characterized by certain indicators and is calculated as the significance of the number of the inactive population among the economically employed group of people. Judging by all available data, the global labor market is almost constantly overcrowded. This problem is more or less continuous. Here, the calculation is carried out according to the period of time when a person is looking for a job - from the moment of losing the previous job until the period under consideration.

On unemployment

Unemployment can be natural and forced on the labor market. Demand and supply of labor are not in long-term equilibrium. If the obstacles in finding a job cannot be removed, this is natural unemployment. When it takes on forms that can exist apart from this cause and thereby increases the level of unemployment, this is involuntary unemployment. The natural one is characterized by the presence of the best reserve of a competitive labor market capable ofmove between industries and regions, responding to fluctuating demand and production needs.

Natural unemployment is heterogeneous in its composition, and therefore it is customary to subdivide it into types: voluntary, institutional and frictional. The latter is also called current, because it is usually caused by staff turnover, not mass layoffs from institutions or enterprises (most often at the request of the employee, which is why this type refers to natural unemployment).

The international labor market thus exchanges highly qualified specialists, that is, such unemployment is both necessary and useful. The place of employment changes precisely because a person deserves more favorable working conditions with a high salary and promotion. Frictional unemployment is only harmful when it is above average.

Institutional and voluntary unemployment

This type of unemployment appeared due to the peculiarities of the labor market, legal regulations, and other factors affecting supply and demand. Most often, the movement in this area occurs inertially, it is rebuilt more slowly than production. Skill levels, the structure and variety of occupations and other characteristics are gradually changing, and as a result, the market lags behind the enterprise and its needs.

This is why an institutional type of unemployment appeared, and it was these factors that influenced its development. The labor market is characterized by imperfect information: people are often unaware of the emergence of freeplaces. Unlike other types, voluntary inactivity appears under the condition that the able-bodied population does not want to work anywhere - for various reasons. Many believe that this type is quite consistent with natural unemployment.

Other types of unemployment

Involuntary unemployment is also divided into several types. They study hidden, regional, structural, technological forms. The latter is most noticeable in those countries where the scientific and technological revolution has triumphed and the average income level is very high. With this combination, it is the reduction of workers that becomes cost-effective, and this phenomenon is constant in highly developed countries.

Scientific and technological development and structural unemployment have become a normal phenomenon: old industries are being reduced, new ones are being developed, where both direct recruitment and vocational training always take a lot of time. Dismissed specialists do not immediately find jobs elsewhere, for some period they will need state assistance, as well as support from the enterprises themselves, which organize vocational training and retraining, taking into account the requirements of the new leadership.

The inactive population is provided with appropriate material support everywhere. The formation of the labor market always moves with some effort as supply and demand rarely match due to constant structural changes.

About migrants

As for regional unemployment, there is basically only one characteristic: the occurrence of an excessactive force in some areas, due to natural or geographical factors unfavorable for any kind of economic activity. This is how developed countries are filled with labor migrants from depressed regions or places where hostilities are taking place. In Russia, these are people from Central and Southeast Asia, in European countries - from the Middle East and Central Asia, in America - from Mexico, China and other zones. Wages in the labor market are very different: the same job for locals everywhere is paid higher than for migrants.

If the country's market mechanisms are deeply deformed, hidden unemployment appears. First of all, there must be an incentive to work, and if it is not there, productivity will be low. There are any number of examples when one rate is divided by two, which indicates that only one job is needed, the other is superfluous. In many countries, hidden unemployment is as high as fifty percent! This also includes cases when a person works part-time or a week, as well as those people who are desperate to find their place, and have already lost their right to benefits, because they have not registered at the labor exchange.

Hidden unemployment in Russia

At the moment, over the past few decades, the economy of our country has been experiencing enormous difficulties, since the transition period has been extremely prolonged. Hidden unemployment shows literally the extreme level of height, and this is the reason for all the negative consequences for the efficiency of production. Happeneddeprofessionalization of the entire country, there are very few vacancies due to the closure of the lion's share of manufacturing enterprises. Real wages are extremely low. All this is not in the interests of the workers themselves, but without the active participation of the government, this situation cannot be changed.

Employment problems are very acute, not everywhere even those who work are paid wages on time. First of all, the very state policy in the labor market should be improved, but this is not happening. There are no programs that have been proven by world experience, neither to stimulate the growth of the number of jobs and overall employment, nor to train the workforce and improve skills.

What to do

It is necessary in the near future to increase the availability of at least unemployment benefits, to increase its size. Then people would not experience such terrifying stress during contractions. We need special resources (and very significant ones!) to employ all those who have lost their jobs. Managers should learn to communicate much more closely with employment services, information about the needs of enterprises and the emergence of new jobs should be established.

It is necessary to improve the existing training programs, to establish mechanisms for their implementation in order to employ as many people laid off as possible, and at the same time to satisfy the need for personnel. It is necessary to develop inter-regional ties for the fastest movement in the labor market, and this will require at least the creation of housing management centers in the regions.

Virtually not createdno necessary social conditions for employment with relocation to another region. Workers from Tajikistan and other Central Asian republics come to Moscow to earn pennies and live in basements. They are also satisfied with this option, since it is generally impossible to get a job in their own country.

Labor market and market economy

The type of relationship between the boss and his employee has changed radically with the introduction of a market economy. New social roles appeared, as well as corresponding functions. For example, the employer has a completely different attitude to wages and the use of personnel, as it was in the USSR. The market economy dictates that employees must be employed efficiently and wages must be distributed rationally. The relationship between the amount of work and remuneration has changed. Professional growth and mobility have also taken on a new meaning.

The labor market is an integral and main part of the economy, together with the market for goods and securities. A profitable enterprise can attract investors to lend part of their capital for the development of production. This creates jobs and increases earnings. If demand for products falls, investors retreat from the enterprise, labor potential naturally declines.

The labor market is a multifactorial mechanism, it is formed taking into account many social and economic conditions, but it also has a strong effect onthem. This is the sphere of the economy in which there is an exchange between the owners of active employees and the owners of the means of production. The subjects in the labor market are both employees and managers: some sell their own labor force, others acquire it. After the conclusion of the transaction, it becomes possible to work on consumer goods. The law of supply and demand in the labor market is fundamental. Only one principle applies here regarding the first concept: the more expensive the labor force, the less profitable it is for management. And the market supply also has one principle: the higher the active power is valued, the more sellers it has.

The main role of the labor market

The labor market allows you to effectively use labor potential, increase interest in the growth of the qualifications of each specialist, maintain high labor productivity by reducing staff turnover, work with various forms of employment (part-time, one-time payments for work performed, etc.). In this direction, it is becoming more sustainable and multifaceted, more and more efficient methods of farming are being developed.

All subjects of the labor market have sovereignty, that is, independence, which gives them the freedom to defend their own interests, even if they are contradictory. This is how labor relations develop in the labor market. His condition is influenced by the level of the country's economy: the higher it is, the busier the market. Of great importance here are the features of the state, including national ones: the absence or presence of sexism, racism and other remnants of the past. If the country is in recession, the labor market functions worse; if it rises, it flourishes.

Hinders the development of the labor market population, that is, labor resources, the share of the active population in economic terms, the number of holidays and days off, the provision of benefits (that is, state policy), the level of education (qualification depends on this), welfare (the consumer budget depends on this), the development of public institutions. The labor market can be local, but there is also a global one, everyone has their own approach and their own opportunities.

State policy on the labor market

The main thing in the policy of the state regarding the exchange of labor force is to take into account all the features inherent in local markets on its territory. They, despite the fact that they are located within the same country, have common features in the sectoral structure, depending on the state of social, demographic situations, and economic ties in the region. These are quite large differences regarding population density, its size, as well as historical development.

Scientists have not done enough work on the formation of the labor market theory. Even the main economic categories are interpreted differently. The classical approach is the interaction of supply and demand, on which the functioning of the market depends. Neoclassical theory speaks of highly competitive relationships, where all actors understand how the economy works and are able to find ways that are beneficial to their own interests. Rates and prices instantly adjust to the slightest changes in supply and demand.

Marxist theory defines labor power as a commodity whose efforts create surplus value, and the rest of the capital transfers its value to each new product. Profit thus arises from the exploitation of the wage earner. Keynes created his own theory regarding the instability of the labor market, fixed wages and elastic demand. There are many theories, but scientists have not yet come to a common denominator.