Economics Report: Understanding Labour Market Dynamics in Canada

This report provides an analysis of the Canadian labor market, focusing on the dynamics of demand and supply, and the factors contributing to wage differentials. It highlights that the demand for labor is derived from the demand for the product or service being produced. Key factors influencing labor demand include labor productivity, prices of goods, and firm profitability. The supply of labor is influenced by wage rates and alternative market opportunities. The report also explores occupational, inter-firm, inter-industry, and geographical differences as causes of wage differentials. It further discusses recent trends in the Canadian labor market, including increased participation of women and growth in the technology sector, referencing data and reports from 2017-2019. The analysis points to a generally positive trend in the Canadian labor market, with increasing job vacancies and a decreasing unemployment rate.

Running Head: DEMAND AND SUPPLY 0
Economics

DEMAND AND SUPPLY 1
Thesis statement
The thesis statement of the report is the “condition of labour market in Canada.” Besides this
concept of demand and supply is also presented in the report.
Labour market
Demand for labour is a deprived demand that means it totally hangs on the demand of
the product that is produced by any firm or worker. For example- if the demand of visitors
increases in a coffee shop that means the employee’s demand automatically increases.
Besides this, it also depends on the prices of goods, labour productivity, as well as
profitability of firm. MRP that is “Marginal revenue product of labour” that states that is the
additional revenue that any firm receives by providing employment to additional worker. It
totally depends on the marginal revenue received from sell of last good and productivity of
workers. Marginal physical product indicates the additional output that is produced by extra
worker (Johnson, 2017). Marginal revenue is the additional gain that any firm receives from
the selling of last unit of output. In this way, it is clear that demand for labour depends on the
productivity of labour, wage rate, and demand for good. Labour of demand depends on the
various factors such as productivity, cost of substitute good, and demand for product as well
as technology. Productivity is the essential factor that influences the demand of labour. It is
true that employer will always employ more units of labour until its MPP (marginal revenue
productivity) become equal to wage rate. It is also seen that whenever there is higher demand
of labour, higher will be demand of the labour. Those countries having labour intensive
technology, demand will be high whereas countries having capital intensive technology, less
will be demand of labour.
It is true that there are times when shifts occur in demand and supply of labour. There
are various reasons of shifts in demand and supply. Shift in demand curve occurs due to rise
in demand of consumers, price changes, and increment in productivity of labour, variation in
cost of capital equipment. Whenever the prices of firm output will increase, demand of labour
will also increase. Due to this demand curve shifts upward because of increment. In addition
to this, demand curve also depends on the output price. When prices of output increase,
demand of labour shifts to the right that means that more labour demand at each stage of
wage. On the other hand, when price of output decreases, less labour is demanded at each
level of wage. Supply of labour is the total time that each worker is willing to work at a given

DEMAND AND SUPPLY 2
wage rate. When the supply of labour slopes upward, it means that workers are attracted to
work for more hours. If the supply curve slopes left, it means those workers are less willing
to work. Besides this, supply of labour also depends on the wage rate of other available
market. If other alternative market is paying more than one firm, supply of labour will
decrease. Due to this, worker will shift to the other alternative market; labour supply of one
market will shift in the left side (Alini, 2018).
There are various reasons of differentials in wage. Among all the reasons, some of
them are major due to which wage differential occurs. The first cause is the occupational
differences. Occupation in every organization differs from each other due to the extent of
responsibility, requirement, or skills requirement (Hansen, 2016). Due to this, wages differ
from occupation to occupation. These differences sometimes persuade worker or people to
undertake more challenging job, persuade workers to develop the skills by the way of training
and education. The skills requirement varied for each of the occupation that forms the labour
planning. Besides this, inter-firm differentials is also one such factor of wage differentials.
Wage differences of workers occur in diverse plan in same occupation or in same area. Some
factors like imperfection in labour market, difference in labour quality as well as supervision
result in the inter-firm differentials. These are differences in managerial efficiency,
technological advancement, size and age of firm, financial capacity, raw material availability,
transport and [power facility all the reasons for wage differentials. Inter-industry differences
are also the reason of wage differentials. Wage differences occur when workers are working
in the same occupation but there is difference in industry (Pigou, 2017). All these differences
are the outcome of unionisation level, product market nature, pay ability, differences in skill
requirement and stage of development of industry. Wage difference occurs not only due to
the difference in occupation, but also differs due to the different geographical region. All
these differences are the outcome of working conditions existing in the various regions of the
country.
The labour force is estimated to increase in the next 10 years but at the slower rate
from the recent time. The various indicators show the positive trend in the labour market of
Canada 2017. The biggest transformation in the advances economy states the increasing
participation of women’s in the paid workforce (Cassells, 2018). The participation in the paid
workforce is the essential indicator in the overall economy. The past year was mostly good
for the economy of Canada. Although it has faced some of the uncertainty in the trade

DEMAND AND SUPPLY 3
relationship with US but then also Canada economy is growing at slow. Unemployment in
the Canadian economy is also having low record. It puts pressure on the employers of Canada
who are required to work hard for remaining competitive. Among all the sectors, Information
Technology was one of the growing sectors in the economy of Canada last year. In the year
2019, Canada will continue to attract the jobs and attention in the technology sector
(Randstad, 2019).
The labour market event in Canada is helping the job seekers to know the
opportunities that might found in the local community or in other place. The various
businesses of Canada reported that the overall vacancies of Job have increases to 2.9% from
0.3 percent. According to the Labour force survey, employment has been increased by the
2.2%. Although at one time, unemployment rate fell to a record of 5.8% in the December
2017 (Hardy, Lovei & Patterson, 2018). The jobs in Canada market is beginning to bring
some more workers into the labour force. It is a trend is it will remain stable will pick up the
wage rate. The labour force in Canada was expanded by 75,600 in the month of June. This
was the biggest increase in the record of six years. All the job seekers have also founded the
work. The Bank of Canada also welcomed the growth in labour force. Canada is also
producing some of the sturdiest gain in the years and this trend is continued in the June.
Besides this, the workers who were doing part-time job also drove the employment gain. The
employment rate of part-time workers was 22,700 higher for the month (Randstad, 2019).

DEMAND AND SUPPLY 4
References
Alini, E. (2018). Here why you still cant’s get a job – or a raise – despite record-low
employment. Retrieved from: https://www.randstad.ca/best-jobs/
Cassells, R. (2018). Womens’s are dominating employment growth, but what sort of job are
we talking about?. Retrieved from: ttp://theconversation.com/women-are-dominating-
employment-growth-but-what-sort-of-jobs-are-we-talking-about-98698
Hansen, B. (2016). A Study in the Theory of Inflation. United Kingdom: Routledge.
Hardy, V., Lovei, M., & Patterson, M. (2018). Recent trends in Canada labour market.
Retrieved from: https://www150.statcan.gc.ca/n1/pub/71-222-x/71-222-x2018001-
eng.htm
Hawthorne, L. (2016). Labour market outcomes for migrant professionals: Canada and
Australia compared. United Kingdom: Routledge.
Johnson, H. G. (2017). Macroeconomics and monetary theory. United Kingdom: Routledge.
Pigou, A. (2017). The economics of welfare. United Kingdom: Routledge.
Randstad. (2019). demanding jobs in Canada 2019. Retrieved from:
https://globalnews.ca/news/4618764/canada-unemployment-labour-market/
Shim, M., & Yang, H. S. (2018). Interindustry wage differentials, technology adoption, and
job polarization. Journal of Economic Behavior & Organization, 146, 141-160.