What the labor market is for. The modern labor market and its features

2024 Author: Howard Calhoun | [email protected]. Last modified: 2023-12-17 10:16

One of the fundamental parts of the modern economy in all countries of the world is the labor market. It is difficult to underestimate the role of this mechanism, since its meaning lies in the fact that billions of people who sell their labor receive a livelihood, and millions of organizations receive the personnel they need to function. That's what the labor market is for in the first place. That is why it is necessary to know its essence, meaning and features not only for economists and owners of large firms, but for absolutely all people.

The concept of the labor market

The labor market is a platform where the employer and the job seeker meet and conclude an employment contract. This is a kind of system of mutually beneficial relationships, social and economic, between two entities.

One side of the contract of employment is a person who needs a job. The other is usually a legal or natural person who needs a professional staff or workforce and is able to employ the applicant.

As in any other market, there is a product here - it's work. A job seeker is a seller of his knowledge, time,abilities and skills. And he wants to receive a reward in the form of wages for the proposed product.

Market elements

The elements of the market are:

• applicant and employer;
• supply and demand, their ratio;
• laws governing the mechanism of the market;
• organizations of employment services;
• career guidance services, employee development enterprises;
• temporary employment organizations (seasonal work, home work, etc.);
• a system of state financial support for citizens who have lost their jobs to reduce, transferred to another job or simply unemployed.

Applicant and employer as market participants

The following groups of able-bodied citizens act as applicants on the labor market:

• citizens who do not have a job and wish to find a job; perhaps people who have already registered with the employment center, or people who are simply looking for a job on their own;
• people working, but wishing to change their place of work for any reason, choosing another position;
• able-bodied citizens on the verge of layoffs.

Employers in this market can be:

• various forms of enterprises and organizations (legal entities);
• individual entrepreneurs (individuals).

Market functions

Why the labor market is needed is easy to understand by considering its main task and the functions arising from it. So, the main goal of this mechanism is to organize full employment of the population with the satisfaction of the needs for hired workers from enterprises and organizations.

The market in question achieves this through the following functions:

• organization of meetings between representatives of enterprises and applicants;
• ensuring he althy competition among market participants;
• establishing equilibrium wage rates.

The market is in the process of negotiating and signing a contract for the sale of human labor on mutually beneficial terms. A well-established mechanism contributes to the most useful use of the labor potential of people, which means that at the macro level, the economy is in the black. The labor market therefore performs a regulatory function.

Having examined in more detail the labor market, its concept and functions, one can ask the question of what contributes to its appearance in countries and what is its state today.

Economic prerequisites for the formation of the labor market

To understand what the labor market is for, you need to know that it is formed in any country first of all with the advent of economic prerequisites. These are:

• Liberalization of all sectors of the economy. Its essence lies in the right to private property, to the availability of means of production and land in one's ownpossession.
• Recognition of a person's freedom of choice in professional, labor terms. That is, everyone can decide for himself where and how to work, for what pay and whether to work at all. At the same time, forced labor actions are prohibited in the country, with the exception of those imputed as punishment by justice.
• Freedom of entrepreneurship as an activity. Every person in the state, alone or with a group of persons, has the right to freely open their own business.

Thus, the formation and functioning of the labor market is influenced by the economy. The labor market cannot be formed outside of it.

Social prerequisites for market formation

For the formation of the labor market, in addition to economic aspects, sociological prerequisites are also necessary, which consist in the formation of inequality in income levels, work experience and qualifications, he alth and education levels between people. As well as the difference in mental abilities and personal qualities (endurance, physical strength, charm, etc.).

This kind of social inequality must be balanced by the state authorities through federal and municipal programs to protect the population from unemployment, through pension payments, subsidies for low-income families and he alth insurance.

Legal prerequisites for the formation of the labor market

The legal prerequisites that form the labor market and the mechanism of its functioning include laws and government orders that can protect the population economically and socially, aimedon the rights and freedoms of the individual. In the Russian Federation, for example, they became:

• The Constitution of the Russian Federation, Art. 7, which states that the Russian Federation is a social state, the purpose of which is to create conditions that ensure a decent life and free development of people.
• The Labor Code of the Russian Federation, which lists and explains the rules for monitoring and regulating labor relations.
• Civil Code, which defines the organizational and legal forms of business.
• FZ No. 10321 “On employment in the Russian Federation”, Federal Law No. 207-FZ “On collective agreements and agreements”, Federal Law No. 10-FZ “On trade unions, their rights and guarantees of activity” and others.

Demand and supply in the labor market

From the definition of the labor market and the description of its subjects, it becomes clear that this mechanism is based on such economic concepts as supply and demand. Demand is the availability of open vacancies, it reflects the capacity of the market. And the supply is the number of unemployed who are ready to sell their labor to an employer. In whatever country is organized and whatever the labor market, supply and demand in the labor market always exist. They change depending on external and internal factors.

Thus, the demand in the labor market depends primarily on the level of wages. His connection under normal conditions, with perfect competition, is inversely proportional to the price of labor. Also, the level of demand is influenced by other economic facts, such as, for example, the demand for goods produced by the enterprise, the levelits technological equipment or the price of the firm's capital.

The supply of labor, on the contrary, is directly proportional to wages. That is, if wages rise, the number of people who are willing and able to sell their professional skills at a given cost increases.

The supply of labor, in addition to the level of wages, is affected to varying degrees by the number of able-bodied population, the number of hours allotted for work per day, week, year, professional qualifications of the working mass.

Demand and supply in the labor market shape the market conditions. It, with their different ratio, may be as follows:

• underemployed (the market is experiencing a labor shortage);
• with labor oversupply (the market is overflowing with labor supply);
• balanced (supply and demand are in equilibrium).

Subjective and objective impact on the functioning of the labor market

Undoubtedly, the state is able to regulate the mechanism of the functioning of the labor market. This action can be taken at various levels of authority:

• federal laws (for nationwide regulation);
• regional or local (to regulate local labor markets according to their specifics).

Also, social organizations such as trade unions can also influence the labor market.

But not only subjective regulation of employment and unemployment depends on howfunctioning labor market. Supply and demand in the labor market, of course, also play a significant role in this process. Moreover, their influence will be independent of the will and opinion of people, as it will be based on economic laws. That is, it will be objective.

Labor market patterns

What could the labor market be like? Markets can be classified as follows:

• depending on the degree of competition (fully competitive market, monopsonic market);
• Depending on government specifics (Japanese model, US model, Swedish model).

Fully competitive is a labor market that includes a large number of firms and organizations competing with each other, as well as a fairly large number of workers entering into confrontation with each other. With this model of the labor market, neither enterprises nor workers can dictate their own terms.

Monopsony is a labor market, which consists in a monopoly on the part of one of the buyers of labor. With this model, almost all employees are employed in one enterprise, without having a choice. Consequently, the firm dictates its own rules, including setting wages. This model is typical for small settlements where one large plant or organization operates.

The Japanese labor market model is characterized by a lifetime employment system, that is, an employee works in the same place until retirement age. At the same time, his salary and social benefits directly depend on the length of service. RaiseQualifications and career growth are going according to plan. If an organization needs to make a reduction, then workers are not fired, but simply transferred to a short working day.

The model of the US labor market is based on the decentralization of legislation in terms of employment and assistance to the unemployed. Each state makes its own rules. In organizations, there is strict discipline and a disloyal attitude towards employees. Career growth does not occur within the company, but by leaving for another company. The unemployment rate, compared to other countries, in America is very high. This is the US labor market, and the causes of unemployment stem from its characteristics.

The Swedish model of the labor market is characterized by a great influence of the state on the employment sector. Here is the minimum unemployment rate due to its prevention.

Specific labor market

It is worth noting that the modern labor market and its features in each state, in each region and even in each locality differ. But the main distinguishing features of all markets is that the subject of sale and purchase is labor. The fact that the seller and the goods cannot be separated from each other, as well as the fact that the goods themselves cannot be stored when they are not needed.

The specifics of all these markets is the impossibility of setting wages lower than those specified by the state.

Why the labor market is needed is easy to understand by considering its concept, goals, models and prerequisites for its emergence. Generallywe can say that it is the basis of a market economy. This means that he is able to dictate his own laws.