So what do labor markets look like?
Well first of all, a labor market will map wage on the y axis and
the quantity of labor or how many people are on those jobs, on the x axis.
And the first thing that a labor market of course, will have is the supply of labor.
The supply of labor's upward slope being because to attract more workers into that
job, you're going to have to pay them more.
You're only going to get so
many philosophers if you don't pay them very much.
There's also a downward sloping demand for labor.
The intuition behind that is that as you get more
people who are entering those jobs, employers are willing to pay less and
less for each additional person to do those jobs.
You only need so many shoe shines, or philosophers, or academics in the world.
Now here's one of the keys to understanding labor markets.
You don't actually see labor supply and
labor demand directly, all we do is we know the world that we live in.
We observe the intersection of labor supply and labor demand.
What do we mean by we observe the intersection of labor supply
and labor demand?
Well for any labor market we can actually
count the number of people it is who hold those jobs in our labor market.
We can count how many philosophers there are in our labor market.
We also know how we can get a rough idea of how much they're paid.
As we can enumerate them, we can count them, that's our quantity.
And we can tell how much they're paid.
But of course if we've been out into the labor market,
we know that not all people in those jobs are going to be paid equally.
They're going to follow some distribution.
And that distribution is what we'll get from administering our salary survey.
We'll get a survey and there'll be a lot of people who are paid near each other in
the middle, and they'll be a few outliers, either high or people who are paid less.