Labor is use of force or effort to accomplish a task. It is also a measure of any work done by a person. There is a school of thought in economics which tries to understand the performance and dynamics of the labor market. It is known as labor economics. There is a labor market in which an employer looks for a worker and looks for the employer. Therefore labor economics tries to understand how workers supply their labor and how the employers demand labor.  Demanders in labor market who are the employers are also a subject.  Distribution of wages in households is a significant field. In most cases, comparison of labor is in relation to factors of production such as land and capital.

Labor has costs in form of direct wages which are paid to workers in return to the services they have provided and the time they took.  In labor market there is labor demand and supply. These two are affected by several factors such as earnings offered, technology, skills and leisure. Equilibrium in the labor market happens when and where the demand for labor balances with its supply.

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Labor markets are segmented according to geographical positions, industry types and levels of education as well as gender. There are instances where some labor markets are not competitive. An example is monopsony whose supply curve is sloping upwards.  Monopsonistic markets are of two types, one is perfectly discriminating and the other is non-discriminating. In case a non-discriminating monopsony wants to increase its wages, every worker will be included but employment wage is less that in competitive market (Mankiw, 2008). In a perfectly discriminating monopsonistic market, a wage increment is made to some employees such that a firm will employ workers up to a point where the cost of the last worker is almost zero.

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