Editing Labour economics (section)

==Macroeconomics of labour markets==
[[File:Job Advertisement Board in Shenzhen -01.jpg|upright=0.9|thumb|right|Job advertisement board in [[Shenzhen]]]]

The labour market in macroeconomic theory shows that the supply of labour exceeds demand, which has been proven by salary growth that lags productivity growth. When labour supply exceeds demand, salary faces downward pressure due to an employer's ability to pick from a labour pool that exceeds the jobs pool. However, if the demand for labour is larger than the supply, salary increases, as employee have more bargaining power while employers have to compete for scarce labour.<ref>{{Cite web|last=Kenton|first=Will|title=Labor Market Explained: Theories and Who Is Included|date=March 30, 2022|url=https://www.investopedia.com/terms/l/labor-market.asp|access-date=January 26, 2023|website=[[Investopedia]]}}</ref>

The [[Workforce|labour force]] (LF) is defined as the number of people of [[working age]], who are either employed or actively looking for work (unemployed). The ''labour force participation rate'' (LFPR) is the number of people in the labour force divided by the size of the adult [[civilian noninstitutional population]] (or by the population of working age that is not [[Institutionalisation|institutionalized]]), LFPR = LF/Population.<ref name=":02">{{Cite book |title=Principles of economics |last=Mankiw|first=N. Gregory|author-link=Greg Mankiw|isbn=978-1-305-58512-6|edition=Eighth|publisher=[[Cengage|Cengage Learning]]|location=Boston, MA, USA |oclc=974706695|year=2016}}</ref>

The non-labour force includes those who are not looking for work, those who are institutionalized (such as in prisons or psychiatric wards), stay-at-home spouses, children not of working age, and those serving in the military. The [[unemployment]] level is defined as the labour force minus the number of people currently employed. The unemployment rate is defined as the level of unemployment divided by the labour force. The employment rate is defined as the number of people currently employed divided by the adult population (or by the population of working age). In these [[statistics]], self-employed people are counted as employed.<ref name=":02" />

The labour market has the ability to create a higher derivative efficiency of labour, especially on a national and international level, compared to simpler forms of labour distribution, leading to a higher financial GDP growth and output. An efficient labour market is important for the private sector as it drives up derivative income through the reduction of relative costs of labour. This presupposes that [[division of labour]] is used as a method to attain cost efficiency.<ref>{{cite web |title=What is 'Labour Market' |url=https://economictimes.indiatimes.com/definition/labour-market |publisher=The Economic Times |access-date=15 September 2022}}</ref><ref>{{cite web |last1=Karanassou |first1=Marika |last2=Sala |first2=Hector |last3=Snower |first3=Dennis J. |title=The Macroeconomics of the Labor Market: Three Fundamental Views |url=https://docs.iza.org/dp2480.pdf |publisher=Institute for the Study of Labor |access-date=15 September 2022}}</ref><ref>{{cite web |last1=Frenkel |first1=Roberto |last2=Ros |first2=Jaime |title=Unemployment, macroeconomic policy and labor market flexibility: Argentina and Mexico in the 1990s |url=https://repositorio.cepal.org/bitstream/handle/11362/31908/S2004202.pdf?sequence=1 |website=repositorio.cepal.org |access-date=15 September 2022}}</ref>

Variables like employment level, unemployment level, labour force, and unfilled vacancies are called stock variables because they measure a quantity at a point in time. They can be contrasted with flow variables which measure a quantity over a duration of time. Changes in the labour force are due to flow variables such as natural population growth, net immigration, new entrants, and [[Retirement|retirements]]. Changes in unemployment depend on inflows (non-employed people starting to look for jobs and employed people who lose their jobs that are looking for new ones) and outflows (people who find new employment and people who stop looking for employment). When looking at the overall macroeconomy, several types of unemployment have been identified, which can be separated into two categories of natural and unnatural unemployment.<ref name=":02" />

''Natural Unemployment''

* '''Frictional unemployment''' – This reflects the fact that it takes time for people to find and settle into new jobs that they feel are appropriate for them and their skill set.<ref name=":02" /> Technological advancement often reduces frictional unemployment; for example, internet search engines have reduced the cost and time associated with finding work and [[personnel selection|hiring decisions]].
* '''[[Structural unemployment]]''' – The number of jobs available in an industry are insufficient to provide jobs to all persons who are interested in working or qualified to work in that industry. This can be due to the changes in industries prevalent in a country or because wages for the industry are too high, causing people to want to supply their labour to that industry.<ref name=":02" />
* '''Seasonal unemployment''' – Unemployment due to seasonal fluctuations of demand for workers across industries, such as in the retail industry after holidays that involve a lot of shopping are over.<ref name=":02" />
* '''Natural rate of unemployment''' (also known as '''full employment''') – This is the summation of frictional and structural unemployment, that excludes cyclical contributions of unemployment (e.g. recessions) and seasonal unemployment. It is the lowest rate of unemployment that a stable economy can expect to achieve, given that some frictional and structural unemployment is inevitable. Economists do not agree on the level of the natural rate, with estimates ranging from 1% to 5%, or on its meaning – some associate it with "non-accelerating [[inflation]]". The estimated rate varies between countries and across time.<ref name=":02" />

''Unnatural Unemployment''

* '''Demand deficient unemployment''' (also known as '''cyclical unemployment''') – Any level of unemployment beyond the natural rate caused by the [[Disequilibrium macroeconomics|failure of markets to clear]], generally due to insufficient [[aggregate demand]] in the economy. During a recession, demand is deficient, causing the underutilisation of inputs (including labour). 
Aggregate expenditure (AE) can be increased by increasing consumption spending (C), investment spending (I), government spending (G), or increasing exports (X), since AE = C + I + G + X. 
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