What is a labour market?

The labour market (or job market) refers to a platform where the demand for and supply of labour meet. In this virtual marketplace, the employer provides the demand for jobs, while workers supply skills. 

The modern-day labour market is global, due to advancements in technology. Consequently, the labour pool is wider, affecting the availability of job opportunities and the quality of hires.

For employers, a globalised labour market demonstrates the unexpected value of hiring international talent. They are more able to hire the best talents without geographic restrictions and can save on hiring costs. 

A global labour market allows employees to increase their access to job opportunities globally. Workers also have more flexibility, as more jobs are becoming remote. While this development is beneficial in some ways, it also increases the competition that job seekers face. Rather than only competing within their local area, they must compete with skilled professionals worldwide. 

Various factors affect the job market. When pay rates rise, the demand for labour increases. Market demand also means manufacturers must produce more goods to satisfy customer needs. Consequently, they hire more workers to fulfil these orders.

Migration also affects the labour market. The influx of foreign nationals increases labour supply and may benefit employers and employees. Strict entry criteria or employment restrictions per industry, such as medicine or law, can limit labour supply. As a result, wages may increase in these fields. 

Labour markets are typically stable, and their sizes vary by demand and industry. Often, skill determines the availability of jobs.

The job market goes through two major phases: loose and tight labour markets. In a loose labour market, unemployment increases because labour supply exceeds the demand. 

A tight labour market is when there is little availability of workers for open job positions. Thus, the demand for labour is higher than its supply. This happens when unemployment levels drop significantly. 

An economy may experience a tight labour market due to an increase in retirement over a short period. Relatedly, an ageing population is a primary factor. When birth rates decrease, a country may experience a shortage of its working population. 

Rapid emigration may also lead to tight labour markets. Some countries are seeing a massive exodus of young people, especially from rural areas. This leads to a shortage of supply for available positions. 

An increase in skill gaps also results in tight labour markets. As technology evolves, new opportunities for advancement arise. This also brings about new disciplines with distinct skill sets to fill specific roles. Relatively new or highly advanced disciplines often experience a shortage of capable personnel. 

Usually, businesses request the services of skilled individuals to fill specific needs and solve critical problems. They can only hire willing and available individuals. Interested and capable individuals take vital steps to prove their readiness and competence for these positions. 

The labour market hopes to create a platform where suppliers of labour receive fair compensation for their skill levels. Thus, the provision of labour must match the compensation.