The Labour Market

It is convenient for economists to talk about the ‘labour market’. This does not mean that human beings are bought and sold as in the days of the old slave trade, but it does imply that there is a market concerned with the supply and demand for man’s efforts. The demand for labour is essentially a derived demand for a special factor of production. Unlike capital, however, labour is not homogeneous even in its untrained state. Human beings have different innate talents, no matter how well trained and developed those talents subsequently may be. Factors of production are organised to produce different commodities required by man, There is a considerable variety of occupations and a multiplicity of individual labour markets. The more a given occupation can be utilised on a wide variety of jobs, the greater the size of that particular labour market will be. Except where his talents are exceedingly scarce, the individual worker is, however, at a disadvantage in bargaining for his remuneration from a given employer, because the latter is in command of capital resources and has the knowledge of the market for his final output, which the individual worker lacks. As a result the labour market has become institutionalised, first by workers grouping together to form trade unions in order to improve the bargaining power of the individual worker, and second by employers banding together in the form of employers’ associations to offset the bargaining power of the trade unions. This gives rise to a series of administratively determined prices or wage rates appertaining to a wide variety of occupations.