Human resources – labour

In order to produce the things we desire, a human resource must be used. That human resource consists of the productive contributions of labour made by individuals who work. The contribution of labour to the production process can be increased. Whenever potential workers obtain schooling and training and whenever actual workers obtain new skills, labour’s contribution to productive output will increase.

The terms “labour” and “human resources” have essentially the same meaning in this context and are often used synonymously. These terms refer to the productive abilities of people. Labour, or human resources, is also limited. There are only so many people at any given time. However the skills, knowledge and talents of people can be improved or made more productive through education and training.

Labour is human effort that can be applied to production. People who work to repair tires, pilot airplanes, teach children, or enforce laws are all part of the economy’s labour. People who would like to work but have not found employment (unemployed)are also considered part of the labour available to the economy.

In some contexts, it is useful to distinguish two forms of labour. The first is the human equivalent of a natural resource. It is the natural ability an untrained, uneducated person brings to a particular production process. But most workers bring far more. The skills a worker has as a result of education, training, or experience that can be used in production are called human capital. Students who are attending a college or university are acquiring human capital. Workers who are gaining skills through experience or through training are acquiring human capital. Children who are learning to read are acquiring human capital.

The amount of labour available to an economy can be increased in two ways. One is to increase the total quantity of labour, either by increasing the number of people available to work or by increasing the average number of hours of work per week. The other is to increase the amount of human capital possessed by workers.

Labour is a meaningful activity with the aim to create goods and services. Labour does not exist itself; the bearer of labour is the man. Revenue for labour is wage.

Demand for labour depends on wages, other resources of production, amount of capital, used technology. Demand for labour also depends on marginal product of labour and marginal revenue product of labour. Marginal revenue product of labour is wage. If the labour force increases, wages decrease.

Labour supply depends on: wage in comparison to social benefits; population; a part of population which forms labour force (both the employees and unemployed); average number of working hours a year (number of working days/daily working hours); quality and quantity of work.

Labour is the workforce of an economy and it is important to analyse labour in two ways:

1. The quantity of labour – obviously the numbers of workers (16-60/65 –population of working age) is finite. A low activity rate could indicate a high level of unemployment and/or high number of students / housewives / early retired.

Many developed countries, including the UK, are suffering from falling birth rates and therefore there are fewer people joining the workforce. There are options open to the government for solving this problem such as a raising the retirement age or raising immigration.

2. The quality of labour – note that some workers are more productive than others. If workers receive more or better training they will be capable of producing more goods and services and this will raise an economy’s labour productivity (output per worker). The value of a worker is called human capital.

Also, it is worth noting that labour can be geographically and occupationally immobile.Geographically people can be unwilling to move area (e.g. family /friends' ties, schools for children, house prices and cost of living) and people are often unwilling to change jobs due to the retraining involved.

From a certain point wages are so high that some people value more free time than higher wage.

Unemployment is measured by unemployment rate and is given in %.

Forms of wages:

Hourly rateis a reward for certain time of hour.

Piece rate is derived from the performance standards - how many pieces on average are made per hour.

Nominal wage is the amount of money we get as a wage.

Real wageis the amount of goods and services which we can buy for the nominal wage. It depends on: the level of nominal wage; the level of prices of goods and services; taxation.