Introduction to Labor Economics.pptVIP

Introduction to Labor Economics Chapter 2 - The Labor Market National and local labor markets national labor market National and local labor markets national labor market local labor market Internal labor market A firm uses an internal labor market if: external hiring is used primarily for entry-level jobs, and higher level positions are filled by promotion from within the firm. Internal labor market reduces hiring and training costs, improves employee morale and motivation, and reduces the effect of uncertainty. Primary vs. Secondary labor markets primary labor market - high wages and stable employment relationships. secondary labor market - low wages and unstable employment relationships. Labor force and unemployment labor force = noninstitutionalized individuals aged 16 or above who are either working or actively seeking work. unemployed = those who are not working but are “actively seeking work” Unemployment rate Labor force participation rate Trend in unemployment rates unemployment rates in the latter half of the 20th century were higher than in the first half Trends in labor force participation rates the labor force participation rate has declined for males (primarily for males in their early 20s and over 62). the labor force participation rate has increased for females (particularly for married females). Sectoral shifts in employment primary sector (agricultural) employment has declined as a share of the labor force, secondary sector (industrial) employment has declined slightly as a share of the labor force, but only in the past few decades, and tertiary sector (service sector) employment has increased as a share of the labor force. Reasons for the shifts in employment the primary sector (agriculture) is characterized by rapid growth in labor productivity and a low income elasticity of demand, the secondary sector is characterized by rapid growth in labor productivity and a moderately high income elasticity of demand, and the tertiary sector is characteriz