Labor markets and wages

Most people earn income by selling their labor, and wages are set in labor markets by supply and demand. Employers' demand for workers depends on how productive the workers are and on the demand for what they produce, so it is called a derived demand. The supply of workers for a job depends on how many people have the needed skills and are willing to do the work. That is why workers with scarce, valuable skills, often built through education and training, called human capital, tend to earn more, and why dangerous or unpleasant jobs often pay extra to attract workers. Changes in technology and trade can raise demand for some skills and lower it for others. Other forces also shape pay: labor unions bargain collectively with employers over wages, benefits, and working conditions, and about one in ten U.S. workers belongs to a union today; minimum wage laws set a pay floor; and discrimination can create unfair pay gaps that laws such as the Equal Pay Act and the Civil Rights Act are meant to prevent.

This explanation is AI-generated and can occasionally be wrong. 🚩 Report