LECTURE IN ECONOMICS (PCBA105) FOR SCARCITY OF LABOR

Labor is the amount of physical, mental, and social effort used to produce goods and services in an economy. It
supplies the expertise, manpower, and service needed to turn raw materials into finished products and services.

Labor is one of the four factors of production that drive supply. The other three are:

 Land. This is short for the natural resources or raw materials in an economy.
 Capital. This is an abbreviation of the capital goods, such as machinery, equipment, and chemicals that are
used in production.
 Entrepreneurship. This is the drive to profit from innovation.

The economy runs most efficiently when all members are working at a job that uses their best skills. It also helps when
they are paid according to the value of the work produced. The ongoing drive to find the best match between skills,
jobs, and pay keeps the supply of labor very dynamic. For this reason, there's always some level of natural
unemployment. For example, frictional unemployment allows workers the freedom to quit a job in search of a better
one.

Labor is measured by the labor force or labor pool. To be considered part of the labor force, you must be available,
willing to work, and have looked for work recently. The size of the labor force depends not only on the number of
adults but also how likely they feel they can get a job. It is the number of people in a country who are employed plus
the unemployed.

Not everyone who is jobless is automatically counted as unemployed. Many are jobless by choice and aren't looking
for work. Examples include stay-at-home moms, retired seniors, and students. Others have given up looking for work.
These are discouraged workers.

The labor force is used to help determine the unemployment rate. The unemployment rate formula is the number of
unemployed divided by the labor force. It tells you how many people in the labor force are jobless but are actively
looking for work.

The amount of goods and services that the labor force creates is called productivity. If a certain amount of labor and a
fixed amount of capital creates a lot, that's high productivity. The higher the productivity, the greater the profit. High
productivity gives the worker, company, industry, or country a competitive advantage.

Labor includes both physical and mental work undertaken for some monetary reward.

In this way, workers working in factories, services of doctors, advocates, officers and teachers are all included in labor.
Any physical or mental work which is not undertaken for getting income, but simply to attain pleasure or happiness, is
not labor.

For example:
The work of a gardener in the garden is called labor because he gets income for it. But if the same work is done by him
in his home garden, it will not be called labor, as he is not paid for that work. Further, if a mother brings up her child, a
teacher teaches his son and a doctor treats his wife, these activities are not considered ‘Labor’ in economics. It is
because of the fact that these are not done to earn income.

Physical and Mental Labor:

Such work in which physical labor and physical strength is more important in comparison to mental labor is called
physical labor. For example—The work of Rickshaw Puller, workers working in factory, porter who carries luggage on
the platform.

But mental Labor is that in which brain is applied or mental fatigue is more in comparison to physical fatigue, For
example—The work of an advocate, teacher, doctor, chartered accountant etc. For better performance of work mental
and physical labor is essential.
Skilled and Unskilled Labor:
Skilled Labor is that in which special knowledge, learning, training and efficiency is required in performing the work.
For example—The Labor of engineer, doctor, teacher and a scientist has been called as skilled Labor.

While the work in which special knowledge, training or learning is not required is known as unskilled labor. For
example—The work of rickshaw puller, porter carrying luggage on platform is called unskilled. The remuneration of
skilled worker is normally higher than that of unskilled worker.

Productive and Unproductive Labor:

Productive Labor is that labor which adds net value to the product. While unproductive labor is that which does not add
net value. In other-words we can say that “Labor producing material goods are productive and Labor producing
perishable goods including services of servants, teachers, doctors, lawyers etc. are unproductive.”

But according to Prof. Marshall all labor is productive. He saw-“no distinction in the work of the baker who provides
bread for a family and that of the cook who prepares rice or boiled potatoes”. Modern economists following Marshall
regard all Labor whether material or non-material or services as productive.

Labor is the fundamental and active factor of production. Labor has important contribution to the production of
commodities. Labor is the exertion of mind and body undertaken with a view to some goods other than the pleasure
directly derived from the work. Like a commodity, Labor cannot be stored and withdrawn from the market for a
favorable time if the wage offered in low.

Further, labor is inseparable from laborer and has to be delivered personally, working conditions or environment are of
great importance. If the place of work is congenial and the management is kind hearted, even a lower wage can be
acceptable. Labor has a weak bargaining power, therefore, the employer has an upper hand in Labor transactions and
the wage given is lower than it is due.

Skilled labor requires workers to possess specific talents that are utilized within an industry. We find work for
engineers, welders, electricians, water supply specialists, and many others who need highly specialized training and
experience to fulfill particular needs.

Skilled labor doesn't just do the job either. Sometimes, they can contribute to re-thinking how the job is done and
employing new techniques and technologies when suitable.

These workers, of course, command a high wage. They lend businesses expertise, creativity, and efficiency. A business
that employs people in the right skilled labor jobs can gain a significant advantage in its industry.

Unskilled labor simply refers to workers who lack technical training and expertise. Unskilled labor jobs are just as
crucial as skilled labor jobs. No engineer will get anything done without workers to implement their plan, for example.

Though unskilled labor usually doesn't have the training requirements of skilled labor, talents for managing, operating
machinery, and implementing procedures are still highly valued. This means that unskilled labor must also be matched
well to businesses.

Mixed-Labor
Most businesses must employ a mixed-labor approach, where skilled labor can work on areas of specific expertise, and
unskilled labor can keep the business going on a day-to-day basis. A successful company values both their skilled and
unskilled labor, and considers finding the right fit in any job a key part of that success.