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Labor economics studies work-related factors, including the worker-employer relationship, wages, and unemployment. It can be microcosmic or macrocosmic, and is important for business strategy and government policy. Determining fair wages involves considering factors such as market wage range, cost of living, and benefits.
Labor economics is a form of economic philosophy that examines the factors involved in work. The field of labor economics is quite broad; Labor market analysis can include not only economic considerations, but also sociological, psychological and statistical issues. Some of the issues explored by labor economics include the influences of education and social dynamics on work, the relationships between the workforce and employers, and wages.
Probably the most important area of labor economics is the relationship between workers and employers. Workers and employers have an inextricably linked contract of supply and demand: workers provide the skilled labor that employers require, while employers provide wages and benefits that workers demand. How this relationship works involves many different factors, including geographic and social considerations, the role of other related markets, and the evolution of economic philosophy.
The economy of work is often described as microcosmic or macrocosmic. Microcosmic economics examines and analyzes individual issues such as the worker-employer relationship within a single firm. Macroeconomic issues involve analyzing the labor market through its relationship with the economy, comparing it to similar but distinct segments of the economy, such as the exchange rate.
The macrocosmic economics of work can be used to determine and analyze issues such as unemployment. If the housing market falls, it could cause a rise in job unemployment as new construction jobs fall. Labor economics not only studies unemployment in terms of how many people are out of a job, but also investigates deeper questions such as what type of unemployment is occurring and what factors may be contributing to or causing levels of unemployment. Issues of unemployment in the economy can be vital in determining business strategy and government policy regarding labor efforts.
Another important consideration in this area of economics is the determination of wages. Figuring out whether a worker is receiving a fair and sustainable price for their work is a complicated process that involves many issues. The market wage range for the job, cost of living as determined by geography, price of education or training for the job, and additional compensation such as health benefits must be considered before reaching a conclusion about a fair wage.
The labor market is the area of an economy where goods are produced, technological innovations are made, and a large portion of people earn their daily wages. For this reason, studying the economy from a labor perspective is an important part of total market analysis. Not surprisingly, given the importance of the results, there are many different theories about how a labor market should be examined. With nearly as many viewpoints as there are economists, locating hard labor market data can be an overwhelming and almost impossible task.
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