Modern Labor
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• C / 0" - #. $. ic!ramasin%he
• C / - G. (. Chandana
University Of Colombo - a!"lty of #rad"ate St"dies
$
he sie of a !o"ntry*s labor for!e is
determined by the sie of its ad"lt
&o&"lation'
e!onomi!s for ea!h and every
!ommodity'
.
em&loyees'
insights for individ"als as /ell as for the
so!iety'
0
res&onse to general in!entives /ages,
&rofits and non &e!"niary a!tions'
+aving t/o as&e!ts !alled &ositive
e!onomi!s and normative e!onomi!s'
2
• le7ibility of /or4 ho"rs
• Time is the key element of the labor market.
Apart from that
School
Migration
8
con+.
• Change of labor for!e &arti!i&ation'
• 9m&a!t of immigration'
• Rising /age ine"ality'
Universit Of Colombo - a!"lt of #rad"ate St"dies
;
1' 6ositive e!onomi!s - +/hat is
S!ar!ity
Rationality
1<
S"!h as
•age determination'
mobility'
11
con+.
1' or4ers ("tility ma7im"m)
$' irms (&rofit ma7im"m)
>' #overnment (infl"en!e the s"&&ly ? demand or !hange the r"les of the game)
Learnin% labor economics can help you +o hae a be++er unders+andin% o +he real labor economics problems and predic+ +he labor mar!e+ ou+comes.
Universit Of Colombo - a!"lt of #rad"ate St"dies
1$
/here b"yers determine the demand and
sellers determine the s"&&ly, together /ith
the means /hereby they e7!hange their
reso"r!es'
1>
•@emand for %abor
1.
10
12
Ob3ec+ies 4 5ac+s O Posi+ie
Economics
to be !orre!t, b"t they m"st be able to be
tested and &roved or dis&roved'
Universit Of Colombo - a!"lt of #rad"ate St"dies
1A
Economic Concep+s
18
Economic Concep+s con+.
•6eo&le have "nlimited /ants b"t reso"r!es
are limited'
de!isions m"st be made to allo!ate
reso"r!es effi!iently'
1;
#a+ionali+y 6#a+ionali+y is the 2uali+y or s+a+e o bein% reasonable
based on fa!ts or reason'
•7+ili+y Ma8imia+ion
Considering &ersons, e!onomists ass"me that the obe!tive
being &"rs"e'
dimensions of em&loyment'
Considering the behavior of firms, e!onomists ass"me that
the goal of behavior'
$<
•By "sing sim&le !al!"lations &hysi!ists !an &redi!t things'
•B"t the a!t"al &oint of things may vary from the &redi!ted &oint be!a"se of the fa!tors ignored in the !al!"lations'
•he &oint is that /e "s"ally "st need to 4no/ the average tenden!ies of o"t!omes for &oli!y &"r&oses'
•o estimate these tenden!ies, /e need to 4no/ the im&ortant for!es at /or4, b"t /e m"st !onfine o"rselves to fe/ eno"gh infl"en!es so that !al!"lating estimates remains feasible'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$1
Posi+ie Economics con+.
Economic Model
em&loyees and the &rofit-ma7imiing behavior of
firms lead "s to e7&e!t lo/ t"rnover to be
asso!iated /ith high /ages and high t"rnover /ith
lo/ /ages, other things e"al'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$$
,mpor+ance 5ac+s Abou+ Predic+ions
• he &redi!tions emerge dire!tly from the t/in ass"m&tions of scarci+y and ra+ionali+y'
• he ass"m&tions of the theory !on!ern individ"al behavior of em&loyers ? em&loyees, b"t the &redi!tions are abo"t an aggregate relationshi& bet/een 9a%es and +urnoer '
• e made the &redi!tion of a ne%a+ie rela+ionship bet/een 9a%es and olun+ary +urnoer by holding other things e"al'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$>
1. ;olun+arily +ransac+ions
9f the mar4et is s"!!essf"l in fa!ilitating all &ossible m"t"ally benefi!ial transa!tions' !all Pare+o Eiciency'
". #edis+ribu+ional +ransac+ions.
hese transa!tions often involve the redistrib"tion of in!ome, from /hi!h some gain at the e7&ense of others (government thro"gh ta7 ,e7&endit"re &oli!ies)'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$.
a' =ll &arties /ho are affe!ted by the transa!tion
gain'
!' Some &arties gain and some lose from the
transa!tion, b"t the gainers f"lly !om&ensate
(&ay off)the losers'
$0
Goernmen+ Policy
fre"ently involve %oernmen+al in+eren+ion'
• or other ty&es of transa!tion barriers, the
needed involvement is for +he %oernmen+ +o
ei+her compel or ac+iely promo+e
+ransac+ions different from the ones that /o"ld
be made by +the mar4et'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$A
Goernmen+ Policy con+
$8
• One so"r!e of dis&"te is rooted in the &roblem
that +here is no+ a uni2ue se+ o +ransac+ions
+ha+ are Pare+o eicien+.
• he se!ond so"r!e of dis&"te over e"ity and
effi!ien!y is rooted in the &roblem that to
achiee more e2ui+y< s+eps a9ay rom Pare+o
eiciency mus+ o+en be +a!en.
Universit Of Colombo - a!"lt of #rad"ate St"dies
$;
>1
• C / - G. (. Chandana
University Of Colombo - a!"lty of #rad"ate St"dies
$
he sie of a !o"ntry*s labor for!e is
determined by the sie of its ad"lt
&o&"lation'
e!onomi!s for ea!h and every
!ommodity'
.
em&loyees'
insights for individ"als as /ell as for the
so!iety'
0
res&onse to general in!entives /ages,
&rofits and non &e!"niary a!tions'
+aving t/o as&e!ts !alled &ositive
e!onomi!s and normative e!onomi!s'
2
• le7ibility of /or4 ho"rs
• Time is the key element of the labor market.
Apart from that
School
Migration
8
con+.
• Change of labor for!e &arti!i&ation'
• 9m&a!t of immigration'
• Rising /age ine"ality'
Universit Of Colombo - a!"lt of #rad"ate St"dies
;
1' 6ositive e!onomi!s - +/hat is
S!ar!ity
Rationality
1<
S"!h as
•age determination'
mobility'
11
con+.
1' or4ers ("tility ma7im"m)
$' irms (&rofit ma7im"m)
>' #overnment (infl"en!e the s"&&ly ? demand or !hange the r"les of the game)
Learnin% labor economics can help you +o hae a be++er unders+andin% o +he real labor economics problems and predic+ +he labor mar!e+ ou+comes.
Universit Of Colombo - a!"lt of #rad"ate St"dies
1$
/here b"yers determine the demand and
sellers determine the s"&&ly, together /ith
the means /hereby they e7!hange their
reso"r!es'
1>
•@emand for %abor
1.
10
12
Ob3ec+ies 4 5ac+s O Posi+ie
Economics
to be !orre!t, b"t they m"st be able to be
tested and &roved or dis&roved'
Universit Of Colombo - a!"lt of #rad"ate St"dies
1A
Economic Concep+s
18
Economic Concep+s con+.
•6eo&le have "nlimited /ants b"t reso"r!es
are limited'
de!isions m"st be made to allo!ate
reso"r!es effi!iently'
1;
#a+ionali+y 6#a+ionali+y is the 2uali+y or s+a+e o bein% reasonable
based on fa!ts or reason'
•7+ili+y Ma8imia+ion
Considering &ersons, e!onomists ass"me that the obe!tive
being &"rs"e'
dimensions of em&loyment'
Considering the behavior of firms, e!onomists ass"me that
the goal of behavior'
$<
•By "sing sim&le !al!"lations &hysi!ists !an &redi!t things'
•B"t the a!t"al &oint of things may vary from the &redi!ted &oint be!a"se of the fa!tors ignored in the !al!"lations'
•he &oint is that /e "s"ally "st need to 4no/ the average tenden!ies of o"t!omes for &oli!y &"r&oses'
•o estimate these tenden!ies, /e need to 4no/ the im&ortant for!es at /or4, b"t /e m"st !onfine o"rselves to fe/ eno"gh infl"en!es so that !al!"lating estimates remains feasible'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$1
Posi+ie Economics con+.
Economic Model
em&loyees and the &rofit-ma7imiing behavior of
firms lead "s to e7&e!t lo/ t"rnover to be
asso!iated /ith high /ages and high t"rnover /ith
lo/ /ages, other things e"al'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$$
,mpor+ance 5ac+s Abou+ Predic+ions
• he &redi!tions emerge dire!tly from the t/in ass"m&tions of scarci+y and ra+ionali+y'
• he ass"m&tions of the theory !on!ern individ"al behavior of em&loyers ? em&loyees, b"t the &redi!tions are abo"t an aggregate relationshi& bet/een 9a%es and +urnoer '
• e made the &redi!tion of a ne%a+ie rela+ionship bet/een 9a%es and olun+ary +urnoer by holding other things e"al'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$>
1. ;olun+arily +ransac+ions
9f the mar4et is s"!!essf"l in fa!ilitating all &ossible m"t"ally benefi!ial transa!tions' !all Pare+o Eiciency'
". #edis+ribu+ional +ransac+ions.
hese transa!tions often involve the redistrib"tion of in!ome, from /hi!h some gain at the e7&ense of others (government thro"gh ta7 ,e7&endit"re &oli!ies)'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$.
a' =ll &arties /ho are affe!ted by the transa!tion
gain'
!' Some &arties gain and some lose from the
transa!tion, b"t the gainers f"lly !om&ensate
(&ay off)the losers'
$0
Goernmen+ Policy
fre"ently involve %oernmen+al in+eren+ion'
• or other ty&es of transa!tion barriers, the
needed involvement is for +he %oernmen+ +o
ei+her compel or ac+iely promo+e
+ransac+ions different from the ones that /o"ld
be made by +the mar4et'
Universit Of Colombo - a!"lt of #rad"ate St"dies
$A
Goernmen+ Policy con+
$8
• One so"r!e of dis&"te is rooted in the &roblem
that +here is no+ a uni2ue se+ o +ransac+ions
+ha+ are Pare+o eicien+.
• he se!ond so"r!e of dis&"te over e"ity and
effi!ien!y is rooted in the &roblem that to
achiee more e2ui+y< s+eps a9ay rom Pare+o
eiciency mus+ o+en be +a!en.
Universit Of Colombo - a!"lt of #rad"ate St"dies
$;
>1
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