Man can participate in various economic activities and produce certain material values not being a part of the labor market. In this case we can talk about those who are active in their households. This is a specific case of economic activities since it lies beneath bureaucratic state as well as free market. Nevertheless, households involve considerable amounts of people, producing a sustainable part of goods and services, which is true for any kind of society, whether it is well-developed or primitive. Labor market, in this case, is much easier to observe since it is situated clearly between workers (those who possess labor force), entrepreneurs (employers) and a state concerning exchanges of individual labor for another resources, and the societal division of labor. Despite being separated from the free market, households also influence the market, particularly, the labor one. In the following study we are going to observe the tricky connection between households and labor market
In general, labor market can be regarded as a form labor force movement, which is determined by social and economic factors and is corresponding to the developed commodity exchanging system. Obviously, the elements of labor market are the following: price, competition, demand and supply of labor force. In this case price is represented by wages, demand – as the needs of a certain industry, enterprise or economic branch. Supply is shown as the number and structure of the existing labor resources. Consequently, competence is the interactions between market subjects who influence the demand and supply of labor force and the level of prices (wages).
Neoclassic model of labor market equilibrium suggests stable full employment, where the number of available working places equals the quantity of the labor force. Pricing on the labor market defines one of key values – wages. Hence, economical basis of the division of these values is the possession of production factors, particularly, for the labor force. Possession of labor force, consequently, is a basis of getting factor income, which in this case is wages.
We may see that employees offer their labor force for certain benefits, whereas employers show their demand for labor force and are ready to pay for it. Theoretically, demand for labor can be explained via margin productivity theory, i.e. profitability of hiring an additional worker to the current employees. This case seems relevant if an employer gets additional income from the additional unit of labor, meaning that margin profit from margin product of labor is positive (MRPL>0). Hence, a firm is willing to hire additional employees until an additional worker’s product of labor will not be less than his wages (MRPL>W).
Neoclassic views upon the labor market stress the constant changes of demand and supply of labor force, which is determined by various employers and people ready to be hired. Consequently, the correlation between demand and supply changes the structure of the market. The demand and supply of labor force in this case depend on the level of development of economy and its structure, availability and conditions of …