Labourmarket

A labour market is the arena in which workers offer their labour in exchange for wages and employers hire labour for productive activity. It covers formal and informal work across sectors such as manufacturing, services, and agriculture. The supply of labour reflects individuals’ skills, education, age, and preferences, while demand is driven by the need to produce goods and services. The market is shaped by institutions such as education systems, wage-setting arrangements, unions, employment laws, and by macroeconomic conditions and technology.

Wages adjust to the interaction of supply and demand. Strong demand and restricted supply tend to raise wages, while excess supply or weak demand push wages down. Unemployment can be frictional, structural, or cyclical. Frictional unemployment arises from job search and turnover; structural unemployment from skill mismatches or long-term changes in the economy; cyclical unemployment from fluctuations in economic activity. The natural rate of unemployment represents the level consistent with a stable economy, absent temporary downturns.

Key indicators include the unemployment rate, the labour force participation rate, and the employment-to-population ratio. Data are collected through surveys and censuses. Efficient matching of job seekers to vacancies is supported by employment services, recruitment platforms, and career guidance, while ongoing training helps workers adapt to changing job requirements.

Public policy aims to improve labour-market outcomes through active measures such as retraining programmes, wage subsidies, and employment services, as well as passive instruments such as unemployment insurance. Regulations, minimum wages, and collective bargaining shape working conditions and wage floors. Globalisation, automation, and digital platforms continually reshape labour-market structures, creating both opportunities and challenges for workers and firms.