Topic: labour

In order for any country to grow, it must have a large and skilled labour force. Since the size of this force is related to total population the number of people available for production activities will grow as the population grows. If the growth of population continues to decline, it eventually affect the growth of the labour force. However a labour shortage could be made up by workers from other countries.

There are four major categories of labour that are based on the general level of skills needed to do any kind of job. These categories are unskilled, semiskilled, skilled and professional or managerial.

Unskilled labour. Workers who do not have the training to operate machines and equipment fall into the category of unskilled labour.

Semiskilled labour. Workers who have mechanical abilities fall into the category of semiskilled labour.

Skilled labour. Workers who are able to operate complex equipment and who can do their tasks with little supervisions fall into the category of skilled labour.

Professional labour. Workers with high level skills such as doctors, lawyers and executives of large companies fall into the category of professional labour.

Most occupations have wage rate — a standard amount of pay given for work performed.

How these rates are determined can be explained in two different ways. The first deals with supply and demand, the second recognizes the influence of unions on the bargaining process.

In economics, money is the standard by which the value of things is judged. This standard is not a religious or subjective standard, but an objective and scientific one.

It should be noted that any person engaged in private business is not paid a fixed sum for his activities. He is self-employed and his activities are partly those of an employer and partly those of an employee.

When the level of supply is low in relation to demand as with managers — wages generally are high. In most cases, the higher the level of skills, or grade of labour, the higher the average yearly wage rate. For example, semiskilled workers will receive more, on the whole, than unskilled workers. Skilled workers will receive more than semiskilled or unskilled workers. Professional workers will receive more than any of the others.

There are, however, some cases in which the traditional theory does not explain the variations in wage rates. Some unproductive workers, for example, may receive high wages because of family ties or political influence. Some highly skilled or productive workers may receive low wages because of race, sex, or where they live.

When negotiating for wages, unions want to know the wage rates in other plants for the same kind of work and what changes have taken place or will take place in the future in the cost of living.

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Topic: aggregate supply and demand

Aggregate supply — the total amount of goods and services produced by the economy in a given period, usually one year.

A number of factors affect an economy’s aggregate supply. Two of these are the quantity of resources used in production and the quality of those resources. For example, an economy must have an adequate supply of natural resources and capital goods to be productive.

A third factor affecting aggregate supply is the efficiency with which the resources are combined.

The most important economic statistics kept in the national income accounts is Gross National Product (GNP). This is the dollar measure of the total amount of final goods and services produced in a year. It is one of the most important and comprehensive statistics kept on the economy’s performance.

Microeconomics is the branch of economics that deals with decision-making and other behaviour by these individual units. Another branch of economics, known as macroeconomics, deals with large groups or aggregates. Because GNP deals with the output of the country as a whole, it is macroeconomic concept.

As a first step in understanding the macroeconomy we think of the economy as being made up of several different parts called sectors. These sectors represent individuals, business, government and foreign markets. The sum of expenditures of these sectors is known as aggregate demand. When aggregate demand or spending falls over a period of one to two years, the economy tends to go into recession, while a rise in aggregate demand tends to lead to booms in the economy.

One sector of the macroeconomy is the consumer sector. The basic unit in this sector is the household, which is made up of all persons who occupy a house, apartment, or room.

A second sector is the business, or investment sector. It is made up of proprietorships, partnerships, and corporations. It is the productive sector responsible for bringing the factors of production together to produce output.

A third sector in the macroeconomy is the government, or public sector. It includes the local, state and federal levels of government.

The foreign sector is the fourth sector of the macroeconomy. It includes all consumers and producers external in the United States.

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