Ch. 5: Aggregate Labour Demand

Aggregate Labour Demand

• = number of employed workers + unfilled vacancies

• Employment= number of employed

  • Used as an approx.

  • Employment /= number of jobs

Three Main Developments in Employment Rate (in the Last 60 years)

1. 1947-1960: 54% to 50%

2. 1981-1982 (recession): max of 60.4%

3. 2008: 63.5%

4. 2018: 61.6%

Shift to Service Sector Employment

• Agriculture: Was 33% of labour force in 1921

  • Now about 1.8% in 2011

• Manufacturing and construction

  • Total employment dropped from 42.5% in 1961 to 17.5% in 2011

• 1967: Service jobs overtook natural resources and manufacturing

• 2011: 78% were employed in services

• Women: 89.8%

• Men: 67.3%

Dynamic Services

• Transportation, communications and utilities

• Wholesale trade

• Finance, insurance and real estate

• Business services

Traditional Services

• Retail

• Personal

  • : Hairstylists

Non-Market Services

• Education

• Health

• Social services

Five Reasons for the Shift to Services

1. Differences in productivity growth rates

   • Productivity in producing goods has grown

   • Productivity in producing services has not grow very much

2. Increases in real income

   • Income elasticity of demand for services is higher than for goods

   • Engel’s Law

3. Contracting out the service part of the company

4. International competition in goods

   • China

5. Increases in the demand for more services as inputs to producing goods P

   • Phones and home appliances have more service input now than before

Productivity

• = Output/input

• Marginal productivity of labour: The extra output obtained by adding one more worker

• Marginal productivity of capital: The extra output obtained from one more unit of capital (Tools)

• Companies uses these concepts to choose more labour or capital to reduce costs

• Increase in total factor productivity(multifactor productivity) = The increase in output obtained from using the same amount of inputs into the production process

Engel’s Law

• More income consumers demand more services

• High proportion of income spent on non-necessities

• Based on income elasticities

Income elasticity of Demand

The relationship between changes in real income and changes in the quantity demanded

Outsourcing

• The contracting out of company internal services

• : Advertising, legal and accounting

International Competition

• Competitors to make goods

• : China with their lower wages

Increase in Demands for Services

• As inputs to manufacturing

• : Design and IT for phones

Precarious Employment

• Employment that is not full time for a year

• Four Types:

  • Part time employment

  • Multiple job holding

  • Own account self employment

  • Temporary employment

• 2002: 34% of Canadians held this non-standard

Hours of Work

• Standard working hours vs. actual working hours

• Regulated hours is 8 hours a day and 40 a week

• Early 20th century: 59 hours a week

• 1957: Reduced to 40

• 2003: 39.6 in manufacturing and 34.8 in services