When speak of the labor supply decision, first of all, let me briefly introduce the trend in current labor force. The first phenomenon is aging, say, when population was 282,194,000 in 2000, the total size of the labor force was 142,583,000 while 17% of labor force was people who aged at least 55. By 2020, the estimated share of the labor force held by those who 55 years old and older is projected to be nearly 24%. However, in 2050, the population is expected to be 322, 600, 00 while the total size of labor force is 194,757, 000. One thing that needs to be noticed is that the people aged 55 or above possess nearly 27% of labor force. The aging of the labor force results in a slowing down of the growth rate of the labor force. Significant numbers of the older age groups in the labor force will be retiring, resulting in a loss of much- needed skills and significant amounts of institutional knowledge. You may want to ask that why those senior people choose to continue to work rather than relax at home while the answer is with the downward of economy, the government is under a heavy burden so that it is not able to accommodate sufficient pension as well as social security welfare, under which elder people have to enter the job market despite of their senior age. The second problem is that the work force is becoming more and more diverse as increasing number of woman entered the job market, meanwhile the proportion of the group including black, Hispanic and Asian is expanding nowadays. The third trend is that with the development of the technology we human being is living heavily relied on high tech. On the other hand the company is looking for employees with various kinds of skills such as mathematical skill, interpersonal skill, computer skill, verbal skill… etc. Hence, the gap between skill needed and skill available is becoming wider and people in labor force are suffering the fierce competition due to strict job requirements and uncountable competitors.
After analyzing the trend in current labor force, we need to figure out the strongest legal supports for labor markets and therefore know how the government keeps the labor market as stable as it can. There are totally three branches: (1) Legislative branch (2) Executive branch (3) Judicial branch. Each of them has its own duties and obligation to maintain the labor market in the U.S. Let’s focus on the Legislative branch first; it is in charge of enacting a number of laws governing human resources activities. In addition, it is also a kind of deliberative assembly with the power to pass, amend, and repeal laws in order to protect the interest of the employees. And then let’s switch gears to executive branch, which responsible for enforcing the laws and includes the regulatory agencies that the president oversees, it takes over the daily administration of the states, and take action based on what Legislative branch enacted. Last but not least, the judicial branch, which interprets the law finally, is the Supreme Court that represents the court of final appeal together with lower courts. At the same time it provides a mechanism for the resolution of disputes. Under the doctrine of the separation of powers, the judiciary generally does not make law (that is, in a plenary fashion, which is the responsibility of the legislature) or enforce law (which is the responsibility of the executive), but rather interprets law and applies it to the facts of each case. This branch of the state is often tasked with ensuring equal justice under law. With protection from these three government branches, the labor market is able to be relatively stable and maximize the equality as well as minimize the discrimination. After knowing the current trend and the mainstay of the labor market, we can move on and talk about several important factors that influence the labor supply substantially. The first factor is gender. When speak of the gender, we always concern about the compensation between male and female. After the Second World War as industry booming, the education system is more advanced than before and women have more chances to access to education, they therefore are more and more welcome to enter the job market as being cultivated. What is more, except for single lady, the married woman can also be part of the labor force for the following two reasons. In the first place, their husband’s compensation in the companies went down so their wives have to step out and look forward to be hired; in the second place various kinds of baby-sitter services emerged and moms can just find some places to settle their babies down. By the way, with the protection of Equal Pay Act 1963 & Pregnancy Discrimination Act 1978, the two laws that eventually protect the benefits of female, women could feel free to have a job. Equal Pay Act 1963 claims that men and women in an organization doing the same work must be paid equally and equal is defined in terms of skill, effort, responsibility, and working conditions. And Pregnancy Discrimination Act (1978) defines discrimination on the basis of pregnancy, childbirth, or related form of medical condition to be a form of illegal sex discrimination, where the benefits, including health insurance, should cover pregnancy and related medical conditions in the same way as other medical conditions. University of Erlangen used to investigate women’s and men’s labor supply to the firm within a semi structural approach based on a dynamic model of new monopsony. Using methods of survival analysis and a large linked employer-employee data set for Germany, we find that labor supply elasticities are small (1.9-3.7) and that women’s labor supply to the firm is less elastic than men’s (which is the reverse of gender differences in labor supply usually found at the level of the market). The results implied that at least one-third of the gender pay gap might be wage discrimination by profit-maximizing monopsonistic employers. The second factor is immigration, which is another crucial word throughout the economy field. As we know, the basic reason why people are willing to leave for a foreign country is just because of the better life, no matter what “better” means; it could be more money or less pressure. Anyway, the people who live in a developing country are inclined to move to an advanced country. Those immigrants could be considered as cheaper labor force compared with those in advanced country. Especially unskilled labor, they are more willing to move to the advanced country to develop greater job opportunities. On the other hand, the advanced country also benefits from this activity since they can receive the same outcome with lower costs. During the immigration, since the benefits for immigrants are substantial so that there might be a group of people who were eager to move but have not proved by government brought on lots of illegal immigration issues that abhorred bitterly by advanced country’s government as well as citizens. Finally the local labor force is not beneficial from immigration and worse off from it. Calibration model of illegal immigration supposed that in a neoclassical growth model there are two groups of workers, skilled and unskilled. We show that although illegal immigration is a boon to a country as a whole, there are distributional effects, whose sign is in general ambiguous, this is because all sources of income of both groups are affected and some of these changes tend to move income in opposite directions. Nevertheless, calibration exercises show that the wealth distribution is likely to become more unequal as the number of illegal immigrants increases. We confirm most of our calibration results analytically in a small open economy version of the basic model.
The third factor is politic. Of course there are certain types of aspects within the politic segment, and I will just provide a simple example to demonstrate how the political factor affects the labor supply market. Just consider pension, a kind of welfare funded by government to raise older people in a nation, it highly correlates whether older people in a society will choose to continue to work or retire. Again, like the aging phenomenon that I mentioned before, I will expand a little bit more here. With an inter-temporal structural model of retirement decisions, simulations illustrate the impact of introducing flexible pension take-up with actuarial adjustment. With the option of perfect consumption smoothing via the credit market, the pension reform which maximize the benefits of old people in Norway, comes into effect from 2011 and reduces the share of retired persons in the age bracket 60-67 (in the base year 15-16%) by around 3 percentage points. With no consumption smoothing, the reduction will be 0.75 percentage points. In order to remain fiscally solvent, governments of many countries have reformed their public pension schemes to encourage labor supply at older ages. These reforms include reductions in the generosity of public pensions and reduced penalties for working past the normal retirement age. To conclude the labor supply of older workers is responsive to changes in retirement incentives. The labor supply of younger workers is less responsive. Thus the trend towards lower taxes on older workers in many developed countries should continue to fuel their trend towards later retirement. It seems that the government policy such as pension system can dominate people’s mind on having a job. Except for such kinds of reform, the U.S government also lunched constitution from time to time according to different situation to maintain the balance and fairness of the labor market. For example, in 1864 when lots of slavery are prevalent in labor market, the Thirteen Amendment was published, a constitution declared that the abolishment of slavery in the United States. In 1967, the Age Discrimination in Employment Act (ADEA) was issued to prohibits the age discrimination against the workers who are aged over 40 as the age discrimination complaints make up a large percentage of complaints filed with Equal Employment Opportunity Commission (EEOC)