Labor In Economics

Labour or Labor

‘Labor’ is the preferred American spelling, whereas ‘Labour’ is the preferred British spelling. Both are Correct. In this article, we have used both spellings.



Labor consists of all human efforts of the body or mind which are undertaken in the expectation of reward.

Characteristics of Labor

  • Labor cannot be separated from the laborer: A landowner as a person and the land owned by her/him can be considered different entities. Likewise, a capitalist as a person is distinct from the capital owned by her/him.
  • Labor is an active factor of production: Land and capital are passive factors, but labor is an active factor of production. Land and capital cannot produce anything without labour.
  • Labor is mobile: Labour can move from one place to another place and from one occupation to another occupation.
  • Labor has alternative uses: Any labourer can engage in different fields of work. An unskilled labourer can work as a hawker or peddler.
  • Labor cannot be accumulated: Labour cannot be accumulated by a labourer; however, a capitalist can accumulate capital and a landowner can accumulate the land owned.

Supply of Labor

The supply of labor is usually measured in units of man-days per year. Factors determining the supply of labor are

  • Population: The most important factor affecting the supply of labour in a country is its population. A larger population with necessary skills to perform physical or mental work will increase the supply of labour to the market.
  • Age structure: The total population of an economy is not considered under supply of labour. Supply of labour depends on the age structure of the population. Working age is legally determined. Child labour is prohibited by law. Salaried people have to retire after attaining a certain age. Hence, only a certain age group of people is considered under supply of labour.

Efficiency of Labor

The efficiency of labour is the productive capacity of a worker. It indicates the ability of the worker to do more or better work during a given period of time. Factors influencing the efficiency of labour:

  • The ability and willingness of workers to work and learn skills depend on their health and therefore on the wage rate and the standard of living. The improvement in standard of living leads to an improvement in health through better nourishment. It also depends on the average age of the labourer.
  • Literacy is perhaps a priority in improving the efficiency of labour. Adequate provisions for imparting training to workers will improve the efficiency of labour.
  • Climatic differences affect the efficiency of labour in production. The hot and humid climate of most states of India is a factor which prevents people from doing more work, and thus, the ability to display high efficiency.
  • A healthy and conducive work environment increases the level of efficiency. The facilities available at the workplace determine labour efficiency to a great extent.

Mobility of Labour

Mobility of labor is the ability and the capacity of labor to move easily and quickly from one place to another place and from one occupation to another occupation. Types of mobility are geographical mobility, occupational mobility, and social mobility.

Division of Labour

Division of labor increases the efficiency of labor. A worker becomes more specialized if she/he is entrusted with only a part of the work in the process of production. As the efficiency of labor increases, the quantity, and quality of production increase in the production process. Society can produce goods at a
lower cost of production.

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