The Labour Market

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In economics, labour is a measure of the work done by human beings.

Categories of the Labour Market


  • Spent some of the previous week working at a paid job


  • Temporary layoff or looking for a job

Not in the labour force

  • Person who does not fit into any of the above categories is not in the labour force

Some Equations

Labour Force = Number of employed + Number of Unemployed

Unemployment rate = (Number of unemployed/Labour Force)*100

Labour-force participation rate = (Labour force/adult population)*100

Canadian Statistics

In 2005, 16.17 million people were employed, and 1.17 million people were unemployed. The total adult population is 25.81.

Labour force = 16.17+1.17 = 17.34 million

Unemployment rate = (1.17/17.34) * 100 = 6.8%

Labour Force Participation rate = (17.34/25.81) * 100 = 67.2%

What does unemployment not measure

Discouraged Job Searchers

  • People who were looking for jobs and need a job but has become discouraged because they were unable to find any

Underemployment workers

  • People who are forced to settle with a part time job when they really want a full time job

Reasons for Unemployment

Fictional Unemployment

Caused by

  • Job search
  • Job turnover
  • Generosity of Employment Insurance
  • Mismatch of skill supplied and demanded

Structural Unemployment

Happen because the quantities of jobs demanded is larger than the quality of jobs supplied

Caused by

  • Minimum Wage
    • When minimum wage is increased, firms will fire people in order to lower production costs.
  • Labour Unions
    • Labour unions increase the wages for the members of the union therefore creating higher cost for firms. Firms will again have to lay off people and the people who are not part of an union will therefore be the first to leave.

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