Labour Economics is concerned with many of the important decisions facing individuals at various different points in their lives, despite some of these decisions being made when the person is not actively involved in the labour market.
For example, it has helped us to gain a far better understanding of the factors influencing how long to stay in full-time education and when is the best time to retire.
The subject has been heavily influenced by micro-economic techniques applied to not only traditional labour market issues, such as the behaviour of trade unions and the labour demand decisions of firms, but also to areas that were not previously thought to have an explicit economic dimension. These include discrimination, migration and a range of household decisions including the allocation of time to different activities, fertility and divorce.
Some new research areas have also emerged in recent decades including Personnel Economics, which uses micro-economic principles to explain the human resource practises adopted by firms and particularly focuses on how workers should be paid (e.g. salaries versus variable pay methods such as piece rates or bonuses) and not just on how much they are paid. On the other hand, some ideas remain fundamental in explaining how labour markets function. In particular, the concept of human capital continues to be an integral feature of contemporary labour economics.
Dr Stephen Drinkwater, University of Surrey