试听180秒008：Employers are Demand and Workers are Supply of Labor

【提示】

本课程是中英双语授课，您可以点击“专辑--节目”选择中文或英文课程进行收听，英文课程由蒂莫西·泰勒本人讲述，对应中文内容是由专业人士完成。谢谢您的订阅，希望您能有所收获。

【英文音频稿】

Hello, Himalaya subscribers. My name is Timothy Taylor. 

China's economy is what happens when about eight hundred million people get up and go to work each day. In this lecture, we want to build on some earlier ideas about the division of labor and the circular flow diagram, and talk about how to apply the idea of supply and demand not to goods and services, as we just did a few lectures ago, but instead to labor. 

Let's make three main points in this lecture. First, labor markets have to reverse our intuition about who is supplying and who is demanding. Second, we'll talk about how supply and demand work in the labor market. And third, we'll talk about using supply and demand to explain China's pattern of rising wages over the last few decades.

Our first point is that labor markets reverse our intuition about who is supplying and who is demanding. Now, what do I mean about that? When I say the words demand and supply to most people, they think of goods and services. So the supply comes from firms or producers and consumers have the demand. But in the labor market, this is turned around. Individuals are the ones who supply labor and businesses or firms are who are employers, are the ones who demand labor in the labor market. Salaries or wages are the price that's paid.

Now, just as there are many goods with many different characteristics, the market for labor is, of course, many different markets, with many different characteristics. For the workers in the labor market, for example, the market for doctors is not the same as the market for factory workers or the market for police officers. But if you can keep your supply and demand concept straight, you can analyze labor markets using the same supply and demand tools as you do with goods markets. So our second main point, how does supply and demand work in a labor mark? 

Let's first talk about the demand for labor. So this is employers wanting to hire workers. Let's imagine that there's some certain wage out there in the market, perhaps because that's the wage that other employers are paying. And employers decide they want to hire a certain quantity of workers given that wage. Now, if the wage goes up, that employer will start thinking about how can we scale back on the number of workers? Maybe find a way to use some machines instead if the wage is lower, then employers will be more open to hiring additional workers. But ultimately, the willingness of firms to hire workers depends on what the labor can produce.

After all, imagine you're running a company and you hire workers, but those workers don't produce enough to justify paying their wage. If that's true, you you won't hire those workers. You'll try and get rid of them. On the other side. Imagine that you had workers producing much more than their wage. Now you might think this this is good news. That's great, right? They are producing much more than i'm paying them. But if that happens, then some other firms should be willing to come along and hire those workers and give them a raise. So over time, and on average, wages that workers receive are going to be determined by the value of what their labor produces.

What about the supply of labor? Well, the supply of labor is, again, a relationship between the wage, but in this case, the quantity of work provided by workers. A higher wage will tend to encourage workers and lead to a higher quantity of labor supplied. And the lower wage would have the opposite effect. Now, this might seem a little odd, because many people are full time workers. 

And if you're a full time worker, often you don't have a lot of choice about how many hours you work. You just work what the job says. But there are a number of people who are part time workers or have some level of flexibility in how much they work. And so you can imagine that people are encouraged or discouraged by those forces and also encouraged, discouraged to move to different areas or different parts of the country. What sort of factors affect the supply of labor? Well, some things are just changes in population. 

If there are fewer workers or say more people who are aging and retirement, that could change the supply of workers in an economy. There can also be shifts in social expectations about who is expected to work. For example, many countries have had a situation where for some time, women were not expected to be in the paid labor force between plenty of work, but not in the paid labor force. And then there was a shift toward more women being in the paid labor force. So those kinds of changes can also affect the supply of work. 

Now, let's take these supply and demand features and put them all together. Imagine a certain labor market, like the maker market for nurses in a certain metropolitan area. If the wage in that area is quite low for nurses, then lots of people will want to hire nurses. They'll be a high quantity demanded because the wage is so low. But not many people want to work at that wage. And so nurses might find other jobs or might even move to other areas with that situation. Lots of demand for nurses, and not many nurses willing to work wages will tend to be pushed up once they start too low. 

What about if the wages starts off very high? In that situation? Then lots of people want to be nurses. People might be moving from other towns to be nurses, but those who are hiring nurses will try not to hire a whole lot of them if they can avoid it. So in that situation, with lots of people wanting to be nurses and not many jobs, wages might start high, but then they will tend to fall, or or at least not rise much for a time. And so over time, these forces of demand and supply will tend to balance out at an equilibrium level of wage where the quantity supplied and the quantity demanded, or roughly equal to each other. 

Now, of course, It's not quite this simple, because people are different than most other things that one might buy and sell. When the wage falls, people might be upset and work less hard. If the wage rises, they might be happier and work harder. And people do worry about being unemployed and about skills, and whether they're working for a company and an employer they like or not. So people have feelings. And that will need to be taken into account. Now, we'll um, talk a lot a lot of different aspects of labor markets in later lectures, issues about unemployment issues, about inequality of income, and other topics. But here, let's just take these ideas of supply and demand for labor and apply them to talking about the pattern of wages in China over time. 

Here's the starting point. Let's go way back to the late nineteen seventies, right? At about the time China's economic reforms are getting started. At that point, wages in China are very low. They are about three percent of the average US wage. In fact, China's wages were also much lower than wages in neighboring asian countries, like the philippines or thailand. Now, those average weight grades rose some, but not alot, in the nineteen eighties and nineteen nineties, and then have risen much more quickly since about two thousand by about two thousand and ten, which is getting to be a few years ago. Now, wages in China were actually similar to wages earned by workers in the philippines and thailand, and wages in China were much higher than those earned by workers in india or indonesia. 

So China is no longer a low wage country. What happened? What caused that transition? Well, again, let's go back to the very beginning in the late nineteen seventies, right about the time the reforms started, when China's economy was all centrally planned. At that time, workers were sent by the central planner to state owned enterprises. Because all the enterprises were owned by the state, and they were given jobs there. Those jobs were often permanent, and there was very little mobility between jobs. The central planner set the wages of all the workers in the country, and they basically had a little a little list. 

The list showed that you got paid a little bit more depending on seniority. If you'd been in the job for a while, but you didn't get paid more for having more education or having special skills or for producing a lot. Wages were low. And while workers who had been on the job longer got paid a little more, they were pretty much low for everybody. Now, in that situation, there's no reward for education. There's no reward for productivity, and there wasn't a lot of output either. This all started to change in the nineteen eighties. 

First, the government began to allow some state owned firms to pay bonuses in the nineteen eighties. But the really big change was the rise of private firms in the nineteen nineties, and the private firms pay quite differently. Private firms were about twenty percent of total urban unemployment or unemployment total urban jobs in the early nineteen nineties, but it was up to about sixty percent of total urban employment by two thousand and eighty percent of total urban employment. By two thousand and ten, these private firms paid more for workers with more education, more for workers with higher skills, more for workers who produced more. 

And so wages began to rise somewhat dramatically for all of those reasons. That was demand leading to higher wages. What about a supply side issue? Let's talk about birth rates. China started policies in the nineteen seventies to push for much lower birthrates, and those did have the effect of slowing down population growth. But it also slowed down the growth of workers. In fact, the number of workers in China peak several years ago, and if their number of workers is no longer growing, the supply is no longer rising. That will tend to keep wage rates high and going up. 

How about another supply factor? China experienced a great internal migration as people migrated from rural areas to urban areas, looking for higher pay and better jobs. Back in nineteen eighty five, there were only about twenty five million people who had migrated from rural to urban areas. But our government statistics in China show that that number was up to something like a hundred and sixty million by two thousand sixteen. Now what that means is that in urban areas, there was a higher supply of labor for a long time because of people migrating into China's cities. 

And that helped to hold down wage increases in the nineteen eighties in nineteen nineties. But in the last few years, that great migration has slowed down. And as a result, that has helped wages to rise more quickly. But the final and biggest reason, probably for why wages have risen so much lately, is that China's workers have developed greater skill levels, and China's factories and employers have hired more, have bought more equipment and more investment. So here are a couple of quick measures. In China. The literacy rate that how many people can read among adults was about sixty five percent in nineteen eighty two. 

And now it's up to something like ninety six percent. Essentially, everyone can read who's an adult in China. Or if you look at the number of people who have completed a secondary level education, that was only six percent of China's population of those over the age of twenty five back in nineteen eighty. And now it's about twenty two percent and rising rapidly. Lots of chinese companies have done huge levels of capital investment. They've bought all kinds of machinery and equipment and computers. So the average worker has more education and also has more machinery to work with. 

There have also been dramatic improvements in technology and research and development. Remember over a sustained period of time, the pay of workers will tend to reflect what they produce, and the productivity of workers has gone way way up in China. In fact, you can think of this all in terms of the division of labor. In the previous lecture. There's more specialization. People have more practice and do things faster and higher quality, and take advantage of economies of scale. One of the big challenges for China's economy moving forward is how to keep wages rising. 

And we will cut returning to that topic of China's future growth in the future path of wages in the next few lectures. The next lecture in particular will discuss a labour market issue that many people worry about. Obviously, you need some automation and robots for better jobs and more productivity. But on one side, will this reduce jobs? Or on the other side was China's economy need that increasing automation and use of robots to keep increasing productivity and wages? 

I'm Timothy Taylor, thank you for listening to Himalaya.