Demand For Labor

What is 'Demand For Labor'

Demand for labor is a concept that describes the amount of demand for labor that an economy or firm is willing to employ at a given point in time. This demand may not necessarily be in long-run equilibrium, and is determined by the real wage, firms are willing to pay for this labor, and the amount of labor workers are willing to supply at that wage.

BREAKING DOWN 'Demand For Labor'

Demand for labor increases market wages and more workers enter the market. But this higher cost of labor will mean that employers will use less labor because it's more expensive.

Assuming there are a large number of employers in a region, or that workers are highly mobile geographically, the wages that a company will pay workers is dependent on the competitive market wage for a given skill set. This means that any company is a wage taker, which is simply another way of saying companies must pay competitive wages in order to obtain workers.

RELATED TERMS
  1. Labor Market

    The labor market refers to the supply and demand for labor, in ...
  2. Justified Wage

    A wage level for a job that is set by market dynamics and justified ...
  3. Labor Productivity

    A measurement of economic growth of a country. Labor productivity ...
  4. Labor Market Flexibility

    Firms' ability to make changes to their workforce in terms of ...
  5. Employment Situation Report

    A monthly report compiling a set of surveys in an attempt to ...
  6. Cost Of Labor

    The sum of all wages paid to employees, as well as the cost of ...
Related Articles
  1. Economics

    The Economics Of Labor Mobility

    Loosening labor restrictions has both good and bad effects for a country and its workers.
  2. Personal Finance

    Will You See Higher Wages In 2015?

    It's been a few years into the economic recovery from the Great Recession, and the employment picture has been rocky.
  3. Options & Futures

    Why Wages Stick When The Economy Shifts

    Even economists can't agree on the impact (or even existence) of wage stickiness. So, how does it affect you?
  4. Economics

    How Education And Training Affect The Economy

    Education and training benefit not only the worker, but also the employer and the country as a whole.
  5. Investing

    Why $15 Minimum Wage Might Not Be Good News for Anyone (MCD, DPZ)

    Discover why the minimum wage isn't the panacea it is made out to be, and how artificial wage increases strain businesses and consumers.
  6. Economics

    Minimum Wage Increase: Will Technology Help Margins for U.S. Companies? (MCD, MSFT)

    Discover why the $15 per hour minimum wage movement may unintentionally be sowing the seeds for a new crop of jobs-stealing robots.
  7. Investing

    Is the Number of Workers in the U.S. Declining?

    The number of workers in the U.S. labor force is declining. What caused it and what is the solution?
  8. Entrepreneurship

    How a Higher Minimum Wage Would Impact the Economy

    Doubling pay for hourly workers could have several knock-on effects to the economy. Here's a brief look at a big issue.
  9. Personal Finance

    Can A Family Survive On The U.S. Minimum Wage? (WMT, COST)

    As the political debate roars on, the numbers are clear: Even two full-timers at U.S. minimum wage can't keep a family of four above the poverty line.
  10. Personal Finance

    Are Markets Ready For An Interest Rate Hike?

    Despite financial market fears over the uncertainty of Greece’s debt crisis and the recent drop in China’s stock-market, Federal Reserve Chairwoman Janet Yellen has reaffirmed the Fed’s plans ...
RELATED FAQS
  1. How do companies measure labor supply in human resources planning?

    Find out how and why a company's human resources department would measure labor supply, and what policies would address a ... Read Answer >>
  2. Do minimum wage laws make labor a fixed or variable cost?

    Find out why labor is a classified as a semi-variable cost by the minimum wage laws; labor has elements of both fixed costs ... Read Answer >>
  3. Does raising the minimum wage increase inflation?

    Explore whether raising the minimum wage increases inflation. This is a polarizing topic that is inherently linked to unemployment. Read Answer >>
  4. How are labor demand forecasts made in human resources planning?

    Discover how human resource planning might be used to estimate the correct demand for labor in a given market, both qualitatively ... Read Answer >>
  5. Do production possibility frontiers have multiple possible equilibria?

    Explore when production possibility frontiers can have multiple equilibria. Learn how backward-bending curves such as labor ... Read Answer >>
  6. Which states have the lowest minimum wage?

    Learn which two states share the lowest state minimum wage and are also the only two that sit below the required federal ... Read Answer >>
Hot Definitions
  1. Physical Capital

    Physical capital is one of the three main factors of production in economic theory. It consists of manmade goods that assist ...
  2. Reverse Mortgage

    A type of mortgage in which a homeowner can borrow money against the value of his or her home. No repayment of the mortgage ...
  3. Labor Market

    The labor market refers to the supply and demand for labor, in which employees provide the supply and employers the demand. ...
  4. Demand Curve

    The demand curve is a graphical representation of the relationship between the price of a good or service and the quantity ...
  5. Goldilocks Economy

    An economy that is not so hot that it causes inflation, and not so cold that it causes a recession. This term is used to ...
  6. White Squire

    Very similar to a "white knight", but instead of purchasing a majority interest, the squire purchases a lesser interest in ...
Trading Center