Work Market
The demand function of work has a negative slope
in contrast to salaries:
The lower salaries are, the more work
companies will demand.
Whilst the work supplied has a positive slope
in contrast to salaries:
The higher salaries are, the more
people will want to work.
Equilibrium in the work market is determined by the crossing
point of the two curves:
There are two main school of economics: the
Classical School and the Keynesian School. They both disagree
with the market's current situation:
According to the Classical
school, the work market is always in a situation of
full employment. This is due to the fact that salaries are sensitive
to the economic situation: if there is unemployment salaries
tend to decrease (unemployed people will be willing to work
for less money). This decrease in salaries, makes companies
contract more labour force, making unemployment disappear.
According to the Keynesian
School, the work market is not always in a situation
of full employement, unemployment can exist. This explains why
salaries in the short term are rigid: even when there is unemployment,
the sindicates are not going to accept a decrease in salaries
which will prevent an increase in the demand of work.
At any rate, the point of equilibrium in the
work market, is where supply and demand cross (it may be full
employment it may not) it will determine the number of people
that are going to participate in the productive process.
