Labour economics

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Labour economics seeks to understand the functioning and dynamics of the market for labour. Labour markets function through the interaction of workers and employers. Labour economics looks at the suppliers of labour services (workers), the demanders of labour services (employers), and attempts to understand the resulting pattern of wages, employment, and income.

In economics, labour is a measure of the work done by human beings. It is conventionally contrasted with such other factors of production as land and capital. There are theories which have developed a concept called human capital (referring to the skills that workers possess, not necessarily their actual work), although there are also counter posing macro-economic system theories that think human capital is a contradiction in terms.

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Compensation and measurement

Wage is a basic compensation for paid labour, and the compensation for labour per period of time is referred to as the wage rate. Other frequently used terms include:

  • wage = payment per unit of time (typically an hour)
  • earnings = payment accrued over a period (typically a week, a month, or a year)
  • total compensation = earnings + other benefits for labour
  • income = total compensation + unearned income
  • economic rent = total compensation - opportunity cost

Economists measure labour in terms of hours worked, total wages, or efficiency.

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