Labor Market So far we have used supply and demand to examine how prices are determined when businesses sell their output to consumers in the market for goods and services. In manufacturing, businesses must purchase the services of land, labor, and capital, the factors of production, in order to produce goods and services to sell to consumers. Supply and demand can also be used to examine how the prices of these factors of production are determined. In this report we will look at how the price of a particular factor of production is determined. This price is the wage or the price of labor. From the table below we can see that income from employment and self-employment represents 73% of all income received in the UK. Factor shares in national income 1997 £ billion % share Income from employment 400.4 62.1 Income from self-employment 69.9 10.8 Gross trade surplus of enterprises 101.4 15.7 Gross trade surplus of public enterprises 4, 6 0.7 income 68.1 10.6 total national income 644.4 100 The labor market in an economy will consist of all those people willing and able to provide for themselves for work and all those people and businesses willing and able to employ them. That is, a labor market exists when there is a supply and demand for labor. There can be many different markets for labor in an economy. Labor markets can be local, national or even international if people are willing and able to travel abroad to find work. There will also be labor markets for every different occupation or type of skill. For example, the market for economists, computer programmers, bricklayers, mechanical engineers or hairdressers. Within each labor market the wage paid to workers will be determined by the forces of labor supply and demand... middle of paper... ...comparability refers to a situation in which workers, perhaps in different sectors, which carry out substantially similar work, have similar qualifications and possess the same degree of responsibility receive comparable wages (i.e. more or less the same). The difficulty here is that some jobs are difficult to compare to other jobs. For example, how does the work of a teacher or nurse compare to other groups of workers? Wage relativity is a similar idea. This happens when a certain group of workers has always received a relatively equal wage or perhaps a proportion more or less than another group of workers. Worker groups are very concerned with maintaining their relativities or differentials, as they are often called. If a worker's differentials are eroded, this is painful only in the sense that wage relativity relative to other groups of workers is diminished.