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Fora aa competitivea labora marketa thea supplya of,a asa wella asa thea demanda ofa labora seta thea
equilibriuma wagea ratea anda thea equilibriuma levela ofa employment.a Thea relationshipa betweena
thesea factorsa changea equilibriuma ona thea labor/productiona side,a justa asa supplya anda demanda
affectsa pricesa ofa goodsa ona ona thea outputa sidea ofa aa market.a Whena thea labora marketa isa floodeda
witha aa largea supplya ofa workers,a thea wagea ratea willa decrease,a asa peoplea willa bea willinga toa
worka fora lessa asa highera positionsa continuea toa fill.a Ona thea othera hand,a ifa therea isa aa labora
shortagea (asa hasa beena thea casea duea toa thea pandemic)a wagea ratesa willa increasea ina ordera toa geta
morea workers.a Justa asa whena wea originallya learneda abouta supplya anda demand,a thesea
relationshipsa anda changesa willa leada toa aa newa equilibriuma beinga found,a thena ita willa repeat.
Onea examplea fora thisa isa substitutea teachers.a Herea ina Sana Diego,a therea isa nota asa drastica ofa
shortagea ofa full-timea teachers,a howevera therea isa fora substitutes.a Ina somea districtsa thea paya fora
substitutesa lasta yeara wasa thea samea asa aa fulla timea teachera (typicallya ita isa abouta half).a Thea
wagea ratea wasa directlya affecteda bya thea supplya ofa workers.a Becausea therea wasa aa massa
shortagea anda demanda wasa ata ana alla timea higha becausea ofa Covida absences,a wagesa increased.a
Nowa thata morea workersa havea beena hireda anda demanda isa decreasing,a wagea isa decreasinga asa
well.
Ina aa competitivea labora market,a thea demanda fora anda supplya ofa labora determinea thea
equilibriuma wagea ratea anda thea equilibriuma levela ofa employment.a Thea demanda fora labora isa
baseda ona thea numbera ofa individualsa ina thea worka force,a whicha isa determineda bya
demographicsa anda thea supplya ofa capital.a Thea demanda curvea fora labora curvesa downa becausea
morea peoplea area willinga toa worka ata lowera wagesa thana highera wages.
Thea demanda fora labora isa inelastica becausea workersa area nota aa commodity.a Whena thea wagea
ratea increases,a thea quantitya demandeda doesa nota changea mucha becausea highera wagesa willa
increasea pricesa ofa goodsa anda services,a whicha lowersa demanda fora them.a However,a ifa thea wagea
ratea decreases,a thena firmsa woulda wanta toa hirea morea workers.a However,a hiringa morea workersa
willa causea firmsa toa producea lowera quantitiesa ofa productsa anda servicesa pera hour,a soa therea willa
bea lessa demanda fora alla labor-intensivea goods,a resultinga ina fewera hoursa worked.a Also,a whena
wagesa falla belowa subsistencea levela workersa willa stopa workinga ora nota entera thea marketa ata alla
causinga furthera shortagesa ofa labor.Fora example,a manya teenagersa starta outa witha minimuma
wagea jobsa buta soona movea upa toa bettera payinga jobsa asa theya gaina experience.a Thea upwarda
slopinga supplya curvea showsa thata workersa wanta toa bea paida morea soa longa asa therea area jobsa
availablea toa them.a Ifa aa persona doesn'ta geta paida enough,a hea ora shea movesa ona toa anothera joba ata
anothera firma untila hea ora shea reachesa ana equilibriuma wagea ratea wherea supplya equalsa demand.
Anothera examplea isa let'sa supposea thata therea isa aa labora shortagea fora electricians.a Thisa meansa
thata firmsa demanda morea electricians,a anda willa increasea theira wagea offer,a toa attracta morea
workers.a Ona thea supplya side,a thisa increaseda offera willa encouragea currenta electriciansa toa worka
morea hoursa ora toa switcha toa anothera sectora anda becomea electricians.
Ina aa competitivea labora market,a thea demanda fora anda supplya ofa labora determinea thea
equilibriuma wagea ratea anda thea equilibriuma levela ofa employment.a Thesea marketsa determinea
thea wagea ratea anda thea quantitya ofa labora thata shoulda bea employeda ina aa couplea differenta ways.a
Asa changesa ina thea availabilitya ofa labora occur,a changesa ina supplya happens.a Fora example,a ifa
thea demanda fora workersa increasea anda therea isn'ta enougha laborers,a wagesa enda upa rising.a Ifa thea
marketa isa saturateda witha laborers,a thena thea wagea ratea decreases.a Whena youa havea aa largea
amounta ofa laborers,a youa tenda toa alsoa havea aa largera amounta ofa supply.a Thea lessa laborersa youa
have,a thea lessa supplya youa have.a Basically,a thea relationshipa betweena supplya anda demanda isa
whata createsa thea wagea ratea anda thea quantitya ofa labora supplied.Ana examplea ofa thea wagea ratea
isa happeninga now.a Duringa thea beginninga ofa thea COVIDa pandemic,a companiesa gota rida ofa aa
hugea amounta ofa theira employees.a Ata thea samea timea aa lota ofa peoplea werea leavinga theira jobsa ina
grocerya storesa etc.a outa ofa fear.a Manya nursesa werea leavinga theira positionsa asa wella duea toa burna
out,a anda manya hospitalsa neededa morea nursesa becausea ofa thea increasea ina healthcarea needs.a
Thisa causeda thea wagea ratea fora aa lota ofa thesea jobsa toa goa up.a Ia remembera seeinga storesa likea
Targeta anda Walmarta advertisinga abovea thea minimuma wagea toa geta morea applicants.a Mya locala
Walmarta wasa offeringa $20+/houra toa hirea peoplea toa worka ata nighta stockinga thea shelvesa
becausea theya didn'ta havea enougha peoplea toa doa it.a Ita previouslya hada beena aa positiona thata wasa
payinga $15-$18/hr.a Manya hospitalsa area nowa offeringa signa ona bonusesa anda increaseda pera
diema ratesa fora nursesa toa geta thema toa applya anda worka becausea theya area desperate.
Thea demanda fora labora comesa froma thea manufacturinga companies.a Labora isa aa parta ofa thea
productiona processa anda isa seta upa competitively.a Thea generala ratea fora thesea wagesa area figureda
bya :a MPL=w/p.
Fora anya market,a thea compensationa ratea isa chosena bya thea proposition.a Whicha cana changea anda
bea differenta ona aa casea toa casea basis.a Ofa coursea ifa thea labora isa morea proficienta anda offeringa
morea profita thana thea compensationa ratea willa build,a anda lessa peoplea woulda bea hired.a Witha thea
marketsa beinga competitive,a thea companya willa havea morea worka causinga morea interestsa fora
work.Righta now,a ana examplea woulda bea alla thea typesa ofa deliverya services.a Youa havea ubera eats,a
doora dash,a posta mates,a restaurantsa witha theira owna deliverya service.a Alla ofa thesea companiesa
area competinga fora thea mosta business.a Theya havea competitivea ratesa toa bringa ona thea mosta
business.a Essentially,a ina aa competitivea labora market,a thea wagea ratea isa goinga toa bea wherea thea
supplya anda thea demanda area equal.a Thea quantitya ofa labora thata shoulda bea employeda isa alsoa
goinga toa bea determineda bya thea pointa ofa equilibriuma alla elsea helda constant.a Wea area seeinga thisa
ata mya placea ofa employmenta currently.a Asa ana oila anda gasa company,a wea area hiringa mena lefta anda
righta becausea thea demanda fora oila anda gasa isa soa higha righta now.a Ita hasa beena ana amazinga timea
ofa growtha anda opportunities.a Onlya aa fewa yearsa agoa thea businessa barelya surviveda whena
demanda droppeda soa lowa duea toa thea pandemic.a Severala smallera companiesa wenta under.a Nowa
thea onesa thata manageda toa pusha througha thata timea area thriving.a Oura managementa isa tryinga toa
usea thea excessa wiselya soa thata eventuallya whena thea demanda fallsa againa ora thea labora marketa
changesa thena oura companya willa stilla doa well.a Whilea wea area hiringa manya mena ina thea field,a wea
aren'ta hiringa manya peoplea ina thea office.a Wea area tryinga toa increasea oura efficiencya bya upgradinga
oura systema instead.a Thea hopea isa thata witha technologya thea samea accountinga teama thata handlesa
foura fieldsa coulda alsoa managea ten.a Ina thea competitivea labora market,a thea supplya asa wella asa thea
demanda ofa labora area thea maina factorsa thata determinea thea wagea ratea anda levela ofa employment.a
Therea existsa aa stronga relationshipa betweena thesea markets.a Thea changesa ina supplya anda demanda
ina thea marketa havea aa significanta impacta ona wages.
Ina thea casea ofa ana increasea ina demanda fora labora ina thea market,a thea wagea ratea increases.a Ona thea
othera hand,a whena therea isa aa shortagea ora reductiona ina thea supplya ofa labora ina thea market,a thea
wagea ratea increasesa (Zhana eta al.,a 2020).a However,a thea reductiona ofa demanda fora labora resultsa
ina aa loweringa ofa thea wagea rates.a Thea increasea ina thea supplya ofa labora cana alsoa resulta ina thea
loweringa ofa thea wagea rates.
Whena thea supplya ofa labora isa higha ina thea market,a thea wagea ratea reducesa anda thea numbera ofa
laborersa thata area employeda increases.a Similarly,a whena thea supplya isa less,a anda thea wagea ratea isa
high,a thea companiesa tenda toa providea employmenta toa aa smallera numbera ofa laborers.a Ina ordera toa
understanda thea relationshipa better,a ana examplea isa thea casea ofa dataa scientists.a Thea demanda fora
dataa scientistsa ina recenta timesa isa quitea high.a However,a thea supplya isa less.a Thisa resultsa ina ana
increasea ina wagea ratesa anda aa greatera levela ofa employment.
Employersa musta considera thea pricea ofa theira productsa anda thea productivitya ofa theira employeesa
ina theira hiringa decisions.a Ifa ana employee’sa wagea isa baseda ona theira productivity,a aa highera
marginala revenuea producta maya resulta ina aa highera wagea fora thata employee.a Thea foura broada
categoriesa ofa resourcesa useda toa producea goodsa anda servicesa area land,a labor,a capital,a anda
entrepreneuriala ability.a Thea paymenta namea fora landa isa rent,a labora isa wages,a capitala isa
interest,a anda entrepreneuriala abilitya isa profita ora losses.a Ina economics,a thea costa ofa ana
additionala unita ofa aa resource,a sucha asa labora isa calleda thea marginala resourcea cost.a Marginala
resourcea costa isa equala toa thea changea ina totala resourcea costa divideda bya thea changea ina resourcea
quantity.a Ifa therea isa aa charta categorizeda witha aa labora column,a totala labora costa columna anda
MRCa column,a wea dividea totala labora costa bya thea changea ina labora anda thata equalsa MRC.a
Employersa willa makea decisionsa ata thea margin.a Toa maximizea profits,a thea employera willa hirea
labora upa toa thea pointa wherea thea marginala revenuea producta equalsa thea marginala resourcea
cost.Onea examplea Ia cana thinka ofa isa beinga aa Ubera drivera ora Doordasha deliverya driver.a Ina
ordera fora thea drivera toa continuea thisa job,a theya needa toa makea morea incomea thana theya spenda ina
gas.a Ifa thea drivera spendsa $60a ina gasa pera weeka anda earnsa $50a incomea pera week,a ita makesa noa
sensea toa continuea drivinga fora thesea companies.a Workersa area demandeda bya firmsa becausea
workersa area neededa toa producea output.a Thea greatera thea levela ofa output,a thea greatera thea needa
fora workersa hencea labora demanda increases.a Thea substitutiona effecta explainsa whya workersa
tenda toa supplya morea hoursa whena wagesa increase.a Puta anothera way,a whena wagesa rise,a thea
opportunitya costa ofa leisurea rises.a thea marketa demanda curvea fora labora isa determineda bya addinga
upa thea quantitya ofa labora demandeda bya eacha firma ata eacha wage,a holdinga constanta thea othera
variablesa thata affecta thea willingnessa ofa firmsa toa hirea workers.a Increasesa ina humana capital,a
changesa ina technology,a anda aa changea ina thea pricea ofa thea producta produceda witha labora willa alla
causea thea labora demanda curvea toa shift,a buta aa changea ina thea wagea ratea willa merelya causea aa
changea alonga thea labora demanda curve.
Gasa hasa increaseda soa mucha thata ita definitelya offsetsa wagesa anda inflationa isa affectinga itsa
purchasinga powera asa well.a Ia wondera ifa therea isa stilla aa higha demanda fora doora dasha instacart,a
sincea morea anda morea peoplea area continuinga toa goa outa asa covida restrictionsa havea relaxed.a Ifa
workersa doa starta quittinga thosea jobsa though,a therea willa bea morea demand,a anda probablya ana
increasea ina wagesa ata thata point,a settinga aa newa equilibrium.Thea increaseda popularitya ofa AI,a
machinea learning,a anda othera analyticala toolsa isa alsoa creatinga morea demanda fora dataa
scientists.a Asa aa resulta ofa thisa higha demanda witha fewera supply,a wagesa havea increaseda asa wella
asa employmenta opportunities.a differencesa ina marginala revenuea productsa area thea mosta
importanta factora ina explaininga wagea differences.a Othera factorsa thata explaina wagea differencesa
includea compensatinga differentials,a discriminationa anda thea bargaininga powera ofa labora
unions.a Whilea labora unionsa tenda toa negotiatea above-equilibriuma wagea ratesa fora theira
members,a theya alsoa tenda toa reducea thea quantitya ofa labora hired.Businessesa anda thea
governmenta havea beena dealinga witha labora shortagesa sincea COVIDa started.a Thisa hasa beena
causeda bya thea reductiona ina thea workforce,a anda aa movementa towardsa homea carea anda familya
caregiving.a Asa aa resulta manya companiesa havea increaseda wagesa toa makea theira positionsa morea
appealing.a Aa gooda examplea ofa thisa isa oura locala Walmarta whicha hasa offereda $20/houra toa
peoplea whoa wanta toa worka nighta shiftsa stockinga shelvesa becausea theya area desperatea toa finda
workers.a aa reductiona ina thea wagea ratea causesa eacha firma toa movea downa theira demanda curvesa
fora labora anda hirea morea workers.a Industrya outputa increases,a whicha meansa producta pricea falls.a
Thea falla ina thea producta pricea causesa thea individuala firm'sa demanda curvea fora labora toa shifta toa
thea left.a Thea marketa demanda curvea fora labora reflectsa nota onlya thea shapea ofa thea individuala
demanda curves,a buta alsoa thisa shifta ina thea MRPa curve.Whilea Ia understanda thata itsa easya toa
thinka thata qualitya ofa workersa isa goinga down.a Ia reallya feela itsa complimentarya ofa eacha other.a
Becausea ofa thea risinga wagea equilibriuma companiesa can'ta afforda toa highera asa manya people.a
Companiesa area havinga toa highera newera workersa anda Ia thinka thata traininga isa whya youa feela thea
qualitya isa down.a Companiesa havea nota beena ablea toa traina employeesa sufficientlya beforea
needinga toa counta ona thema toa performa importanta tasks.a Thisa isa reallya aa difficulta timea righta
now.a Becausea whilea employeesa area demandinga highera wages,a therea isa onlya soa mucha thata youa
cana paya someonea toa wherea ita doesa nota becomea profitablea asa aa business.
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