Some Basic Labor Market Concepts
Classification of labor market status:
- employed (working population):
- perform some work for pay or profit
- had a job but ill, on leave, on strike,
or not working due ot mechanical
breakdown or bad weather
- include employers, employees, the self-employed, and unpaid family
- people who are not employed and who are
available for work and have
looked for work
- in Hong Kong, the unemployed includes "discouraged workers"
who did not
seek work because they believe work is not available
Some important ratios:
- unemployment rate = unemployed / labor force =
171,100 / 3,571,800 = 4.8%
- labor force participation rate =
labor force / relevant population =
3,571,800 / 5,836,300 = 61.2%
- employment rate = employed / relevant population =
3,400,700 / 5,836,300 =
Things to note:
- The distinction between economically inactive
(out of labor force) and
unemployed is often quite fuzzy.
- employment rate = (1 - unemployment rate) *
labor force participation
rate. If labor force participation
rises while unemployment is rising,
the employment rate and the unemployment
rate may go up at the same time.
- Net changes in the stock of people in these labor market
small relative to the gross flows.
- This simple classification does not consider other
important aspects of
labor supply behavior, such as work hours, effort,
and labor market skills.
Different concepts of wages:
- for a worker hired on an hourly basis,
annual earnings = hourly wage x
numbers of hours worked in a year
- his total compensation = earnings + fringe benefits
- his total income = total compensation + unearned income
- the employer's labor cost =
total compensation + employment taxes (e.g.,
- real wage = nominal wage / price index
Question: Suppose you plot wage on the horizontal axis,
and yearly earnings
on the vertical axis, what will be the shape of the graph?
For your interest:
Industry and Occupation Classification:
- Industry refers to the main kind of goods or services
produced by the establishment in which a person worked.
- Occupation refers to the kind of work a person performed.