The labour market
| English | Chinese | Pinyin |
|---|---|---|
| labour market | 劳动力市场 | láo dòng lì shì chǎng |
| derived demand | 派生需求 | pài shēng xū qiú |
| productivity | 生产率 | shēng chǎn lǜ |
| labour supply | 劳动供给 | láo dòng gōng jǐ |
| wage differentials | 工资差异 | gōng zī chā yì |
What sets your wage
- Why does a surgeon earn more than a cleaner? The labour market 劳动力市场 answers with the same tool as any market — demand and supply, applied to workers.
- Wages are a price, set where the demand for and supply of labour meet.
The demand for labour is described as "derived demand" because it depends on:
Firms hire workers to make goods that are themselves demanded — hence derived.
More productive workers tend to command higher wages.
Higher productivity raises the value of a worker to the firm, increasing labour demand.
The demand for labour
- Labour demand is derived demand 派生需求: firms hire workers to produce goods that are themselves demanded.
- It depends on workers' productivity 生产率 and the price of the output — more productive or valuable work commands higher pay.
A garment factory: in a labour market, firms demand workers and the wage is the price of labour
The labour market
Wages are a price. The demand for labour (from firms) and the supply of labour (from workers) set the equilibrium wage.
A higher wage generally ______ the quantity of labour supplied.
The labour supply curve slopes upward: higher wages attract more workers.
The supply of labour
- Labour supply 劳动供给 rises with the wage (a higher wage attracts more workers).
- It also depends on the size of the workforce, skills/qualifications, and the appeal of the job.
Wage and employment are set where labour demand meets labour supply — like any market.
The equilibrium wage is set where:
Like any market, equilibrium is where demand meets supply — here, for labour.
Wage differentials 工资差异
- Wages differ because of skills/qualifications, danger or unpleasantness (compensating differentials), barriers to entry (training, licences), and bargaining power.
Match each factor to why it raises a wage.
Scarcity, compensating differentials and bargaining power all lift wages.
You've got it
- the wage is set where labour demand meets labour supply
- labour demand is derived (from output demand) and depends on productivity
- wage differentials reflect skills, conditions, entry barriers and bargaining power