Factors Increasing Demand for Labor
The labor market can be affected by a variety of factors. One of these factors is the development of particular customers’ preferences. For instance, new products and services appear and they are differently valued by customers. There is also seasonality when it comes to certain goods or services. For example, in many resorts, hotel owners often consider hiring more seasonal staff during hot seasons. Thus, the demand for some workers increases in some areas.
It is also possible to note that customers may develop some preferences and the demand for some products increases. For example, if there is a fashion for eating apples, producers of these products can consider hiring more apple pickers to provide more goods, which increases labor demand (Carbaugh 154). It is necessary to mention that this factor often has a short-term effect. It also usually involves unqualified workers.
It is also possible to mention a demographic factor that leads to an increase in the labor market. Replacement needs result in the labor demand increase (Lacey and Wright 97). This need is mainly associated with qualified labor that requires higher education and extensive experience. Thus, people in such positions often work until their retirement. When they leave, younger professionals are hired. It is anticipated that in the late 2010s, the increase in labor demand in such positions will occur. This is also associated with the fact that many baby boomers are retiring, and there are many job openings.
It is necessary to note that this type of curve happens quite rarely, once in several decades. The rare shift can be explained by the long period of preparation of high-profile professionals who have to gain education and obtain some experience.
The Correlation between the Market Price of the Goods or Service Increase and the Demand for Labor
The goods or services price and labor demand are correlated. The price of goods produced by a company often affects the number of employees hired. This is especially true for small businesses though it is a frequent cause for big companies as well (Wisniewski 163). This process is quite similar for both types of enterprises, but small businesses are more flexible and, at the same time, they have fewer resources. Due to these factors, the correlation is more apparent.
It is possible to consider the process through a brief analysis of the rising prices of goods or services produced by a small company. Thus, if the price of a product or service grows, the company is likely to increase its production to gain more profit. In this case, the company will need more staff to be able to provide more goods. Notably, the demand for labor can involve different professionals. For example, in the case of the apple producers, they may need to hire more apple pickers to be able to provide more products (Carbaugh 176). However, product price may also affect the number of qualified professionals. Thus, a company providing services associated with consulting (especially in such spheres as accounting, IT, and so on), may hire more employees with certain experience and educational background.
When it comes to big companies, they respond to the changes slower than small businesses do. Nonetheless, big enterprises also hire more professionals (whose input directly affects the production and sales) if the price is growing for a particular period. The number of people hired may be insignificant as big companies, in many cases, use technology (equipment, software, and so on).
The Influence of Government-Sanctioned Licensing Requirements on Wages
Government-Sanctioned licensing requirements impose particular barriers for entry into a profession. For instance, the government can impose certain restrictions as to education, experience, and so on. Researchers note that such licensing can be lobbied by professionals who have been in the profession for some time and who do not want the establishment of new standards (Sherk). Introduction or removal of the government-sanctioned licensing requirements has a significant effect on wages.
Thus, when some norms are introduced, many people cannot enter the profession. This happens because employees may be required to have a particular working experience, education, certification, and so on. There is only a restricted number of appropriate employees in the labor market. A considerable amount of time is necessary for people to meet these requirements. As a result, the majority of employers find it difficult to hire appropriate professionals, and the wage of these practitioners increases. Admittedly, companies want to attract high-profile employees, and salaries are often regarded as the central type of motivation.
On the contrary, when the requirements are lifted, more people can enter the labor market in a particular industry. Employees do not need a particular level of education, working experience, and so on. More people can fit the requirements of the employer. The market can become oversaturated, or there can be significant competition among professionals. The wages will inevitably go down as employers will be able to choose the best practitioners without offering substantial monetary rewards. At the same time, people will have to agree to work for lower wages as there will be few alternatives.
Government Intervention
The free market is one of the ideals of the western world. Many people believe that government intervention is unnecessary and even harmful in many industries. Nonetheless, in many sectors of the economy, the response of the government is beneficial for customers as well as businesses.
For instance, when it comes to such spheres as childcare or industries that have diverse effects on the environment or people’s health, certain restrictions and regulations are essential (Paull 30). Many businesses fail to take into account externalities, but government intervention ensures precise compensation. Thus, the government employs such instruments as subsidies and taxes as well as price regulation to intervene (Nguyen and Wait for 147). The measures encourage companies to be more socially responsible.
It is noteworthy that these regulations are often beneficial for businesses as they can develop a more favorable image and, hence, attract more customers. There are cases when such rules enable companies to be more efficient (Paull 30). For instance, in the sphere of agriculture, certain standards make various procedures more cost-effective. The adoption of reduced (or even zero) tillage results in the reduction of fuel and labor use, and it benefits farmers (OECD 40).
Extensive control over the market can have a detrimental effect. It is very difficult to estimate the supply and demand as well as externalities. Therefore, it is hard to introduce effective policies that will lead to the development of the market. Hence, every norm should be comprehensive and precise. It should pose some restrictions but enable businesses to develop. Otherwise, the market will stagnate since entrepreneurs will be uninterested in developing new strategies, products, and services to meet customers’ needs and wants.
Works Cited
Carbaugh, Robert. Contemporary Economics: An Applications Approach. New York: Routledge, 2015. Print.
Lacey, T. Alan and Benjamin Wright. “Occupational Employment Projections to 2018.” Monthly Labor Review 132.11 (2009): 82-123. Print.
Nguyen, Bonnie, and Andrew Wait. Essentials of Microeconomics. New York: Routledge, 2015. Print.
OECD. Public Goods and Externalities Agri-Environmental Policy Measures in Selected OECD Countries. Paris: OECD Publishing, 2015. Print.
Paull, Gillian. “Can Government Intervention in Childcare Be Justified?” Economic Affairs 34.1 (2014): 14-34. Print.
Sherk, James. Creating Opportunity in the Workplace. 2014. Web.
Wisniewski, Jerzy Witold. Microeconomics in Business Management. Chichester: John Wiley & Sons, 2015. Print.