Labour Market
                     LABOUR MARKET
What is the Labour Market?
The labour market, also known as the job market, 
relates to the supply and labour demand in which 
the supply is provided by the workers and demand 
by the employers. It is a significant component of 
any economy and is closely linked to the finance, 
commodities, and services markets.
Source: cleartax.in
Macroeconomic level
At a macroeconomic level, both domestic and 
international market dynamics affect supply and 
demand, as well as variables, such as globalisation, 
population size, and level of education.
Source: cleartax.in
Microeconomic level
Microeconomic theory analyzes labor supply and 
demand at the level of the individual firm and 
worker. Supply or the hours an employee is willing 
to work initially increases as wages increase. 
Source: www.investopedia.com
FUNCTIONING OF A 
LABOUR MARKET 
Wage growth
The wage growth lags productivity growth according to 
macroeconomic theory. Hence, the demand would 
surpass the labour supply. 
When there is downward pressure on wages, the 
workers compete for a limited number of jobs and 
employers and find the best of the talent getting picked.
Source: cleartax.in
Impact of Supply & Demand on 
Wage
In comparison, if the demand is more than the 
supply, there is upward pressure on wages, 
because workers have more bargaining power and 
are more likely to be able to move to higher-paid 
jobs. In contrast, employers have to fight for scarce 
labour.
Source: cleartax.in
Impact of Supply & Demand on Labour 
market
Some factors can affect supply and demand in the 
labour market. An increase in immigration into a 
country, for example, may increase labour supply 
and potentially depresses wages. 
Source: cleartax.in
Labour Market in India
Firstly, between 1951 and 2012, there was a 
significant shift in the population from agriculture to 
manufacturing and services. 
The recent data shows these changes to be 
continuing. As a result of these shifts, productivity in 
agriculture has fallen sharply. 
Source: cleartax.in
Important feature of Indian labour 
market 
 Important feature of the Indian labour market is 
the low rate of participation, defined as the 
population within the age group of fifteen to sixty-
five years (the "working-age" population) who 
either work or seek employment.
Source: cleartax.in
The U.S. Labor Market
In the U.S. unemployment was around 4% to 5% 
before the Great Recession, when large numbers of 
businesses failed, many people lost their homes, 
and demand for goods and services and the labor to 
produce them plummeted. 
Source: cleartax.in