ABSTRACT
Economists are not of one mind concerning the demand side of the labor market. Much depends on their perception of the basis on which firms make their employment decisions and the constraints they encounter in making them. It is useful to recall at the outset that employers hire workers who have the skills required for particular work assignments or which will qualify them for on-the-job training. They are thus using the outputs of the anthropogenic system as inputs to their production processes. The labor markets of the economy thus serve to link the anthropogenic system to the business firms of the economic system which use the skills created by households, schools, and other social institutions as inputs into their production processes to generate the economy’s GDP. These relationships are depicted in Figure 1.3 (p. 15) in terms of a Venn diagram. The concern of this chapter and the one which follows is to show how the position of a firm as a “price taker” or a “price maker” in its commodity and labor markets in which it operates constrains its input employing decisions.
