• The statistics that measure what is happening in labor markets also present special problems that are not present when considering statistics about inanimate factors of production.

Unemployment Statistics:

• The unemployment rate is a very important statistic, as an indicator of the health of the economy and society.

• The unemployment rate is based on what percentage of the people who are in the labor force are not working.

• Although the unemployment rate is supposed to indicate what proportion of the people in the labor force do and do not have jobs, sometimes the unemployment rate goes down while the number of people without jobs is going up.

• Rather than relying solely on the unemployment rate, an alternative way of measuring unemployment is to compare what percentage of the adult population outside of institutions (colleges, the military, hospitals, prisons, etc.) are working.

• There are various kinds of unemployment, and unemployment statistics alone cannot tell you what kind of unemployment currently exists.

Working Conditions:

• Both governments and labor unions have regulated working conditions, such as the maximum hours of work per week, safety rules, and various amenities to make the job less stressful or more pleasant.

• The economic effects of regulating working conditions are very similar to the effects of regulating wages, because better working conditions, like higher wage rates, tend to make a given job both more attractive to the workers and more costly to the employers.

• Other things being equal, better working conditions mean lower pay than otherwise, so that workers are in effect buying improved conditions on the job.

• Growth in per capita output permits both higher pay and better working conditions, while competition for workers forces individual employers to make improvements in both, just as they are forced to improve the products they sell to the consuming public for the same reason.

• Safety Laws: While safety is one aspect of working conditions, it is a special aspect because, in some cases, leaving its costs and benefits to be weighed by employers and employees leaves out the safety of the general public that may be affected by the actions of employers and employees.

• Child Labour Laws: In most countries, laws to protect children in the workplace began before there were laws governing working conditions for adults. Such laws reflected public concerns because of the special vulnerability of children, due to their inexperience, weaker bodies, and general helplessness against the power of adults.

• Hours of Work: Sometimes, in various countries, especially during periods of high unemployment, a government-mandated shorter work week is advocated on grounds that this would share the work among more workers, reducing the unemployment rate.

• Third world countries: Some of the worst working conditions exist in some of the poorest countries—that is, countries where the workers could least afford to accept lower pay as the price of better surroundings or circumstances on the job.

Collective Bargaining:

• Employer Organizations:

  • Pay and working conditions tend to be different when determined collectively than in a labor market where employers compete against one another individually for workers and workers compete against one another individually for jobs.

  • Just as the tendency of market competition is to base rates of pay on the productivity of the worker, thereby bidding labor away from where it is less productive to where it is more productive, so organized efforts to make wages artificially low or artificially high defeat this process and thereby make the allocation of resources less efficient for the economy as a whole.

  • Losses and gains between employers and employees are social or moral issues, but they do not change the key economic issue, which is how the allocation of resources affects the total wealth available to society as a whole.

  • Either artificially low wage rates caused by an employer association or artificially high wage rates caused by a labor union reduces employment in the widget industry.

  • Even in situations where it might seem that employers could do pretty much whatever they wanted to do, history often shows that they could not— because of the effects of competition in the labor market.

  • The ability of employer organizations to achieve their goals depends on their being able to impose discipline on their own members, and on keeping competing employers from arising outside their organizations.

• Labour Unions: Although employer organizations have sought to keep employees’ pay from rising to the level it would reach by supply and demand in a free competitive market, while labor unions seek to raise wage rates above where they would be in a free competitive market, these very different intentions can lead to similar consequences in terms of the allocation of scarce resources which have alternative uses.

Exploitation:

• Usually those who decry “exploitation” make no serious attempt to define it, so the word is often used simply to condemn either prices that are higher than the observer would like to see or wages lower than the observer would like to see.

• The general idea behind “exploitation theories” is that some people are somehow able to receive more than enough money to compensate for their contributions to the production and distribution of output.

• For example, low-paid workers can also be exploited in circumstances where they are unable to move, or where the cost of moving would be high, whether because of transportation costs or because they live in government-subsidized housing that they would lose if they moved somewhere else, where they would have to pay market prices for a home or an apartment, at least while being on waiting lists for government-subsidized housing at their new location.

• The very thing that makes a modern industrial society so efficient and so effective in raising living standards—the constant quest for newer and better ways of getting work done and more goods produced—makes it impossible to keep on having the same workers doing the same jobs in the same way.

Occupational Licensing:

• Job security laws and minimum wage laws are just some of the ways in which government intervention in labor markets makes those markets differ from what they would be under free competition.

• Occupational licensing can take many forms. In some cases, the license is automatically issued to all the applicants who can demonstrate competence in the particular occupation, with perhaps an additional requirement of a clean record as a law-abiding citizen.

• Although the rationale for requiring licenses in particular occupations has usually been to protect the public from various risks created by unqualified or unscrupulous practitioners, the demand for such protection has seldom come from the public.

• In some cases, the license is automatically issued to all the applicants who can demonstrate competence in the particular occupation, with perhaps an additional requirement of a clean record as a law-abiding citizen.

• In other cases, there is a numerical limit placed on the number of licenses to be issued, regardless of how many qualified applicants there are.