Christopher Johnson

Topic Paper 4:
The Analysis of the Demand and Supply of Labor in USA

Presented to:
Greg Gotches

In Partial Fulfillment of the Requirements of:

Managerial Economics
Spring 1, 2016

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The Analysis of the Demand and Supply of Human Capital in the

US
INTRODUCTION:
In any aspect of a production, one needed human capital, or in laymans term, labor, to
produce one unit of good. With the consolidation of fixed asset, labor, machineries and
equipment, raw materials, and entrepreneurial skills, a firm can produce finished products or
quality services, offered to consumers at the end of the day. But all elements of production
should be sufficient to meet growing demand for consumer products and services. The main
question is, What if one element of the production equation is missing or lacking in nature?.
In the recent years, the demand for migrant workers in most western countries hasnt
been in a stable state. In a 10-year analysis, the demand for Human Capital have been
fluctuating, meaning that the trend of the labor market will somehow decrease and increase,
considering the economic and political state of USA.
In the side of economics, when a country is facing drastic decline in economic stability or
recession, demand for labor will tend to decrease also, especially the need for migrant workers,
considering that the host country would want to keep their currency (i.e; United States Dollars)
circulating among them to give rise to the purchasing power of the US Dollar against other
currencies.
Here are some of the factors that a country considers when importing labor:
1. The gap between the demand and supply
2. The cost of labor (i.e: Wages, Salaries)
3. Government policies concerning migrant workers

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HUMAN CAPITAL A.K.A LABOR DEFINED

ACCORDING TO CLAUDIA GOLDIN DEPARTMENT OF ECONOMICS
HARVARD UNIVERSITY
Human capital is defined in the Oxford English Dictionary as the skills the labor force
possesses and is regarded as a resource or asset. It encompasses the notion that there are
investments in people (e.g., education, training, health) and that these investments increase an
individuals productivity.
THE TREND OF DEMAND AND SUPPLY OF LABOR IN USA
For the year 2015, the demand of US Skilled Workers, exceeded its Supply. It means
that there is a shortage in the number of available workers versus the number of jobs available in
the market.
Lets take for example the market for skilled workers and professionals. US have been
engaged in the continuous importation of mentioned workers especially in the South East Asian
Countries because of the following reasons:
1. Labor force cost produced outside US (migrant workers) tends to be cheaper
compared to US workers (Citizens).
2. It will yield a low cost to the firm if they will hire workers (migrants) outside US
as they will be subjected only to the least benefits compared to those of US Citizens
per se.
3. More laborers constitute more unit production at a minimum time.
4. Skilled Workers tend to migrate to other countries for a chance of greener pasture
and better lives.

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Table 1- Number and Percent of Immigrants in the United States 1900-2014,

Plus Census Bureau Projections to 2060

Analysis:
-

Lets look at Table 1. The figure above shows that there is a fluctuating trend in the
actual number and percentage of Immigrant in the United Sates. From 1930-1970 ,
we can see that the drastic decline of US Immigrants was from that year, and it was
the result of the occurrence of World War 2. The lowest point of the trend, which is
known to be the Post World War Era. We can conclude that US stop migrating
workers on that year so that power of Dollar (Universal Currency) will be regained.
And to add that there has been a great loss on business and firms, there is a high

unemployment rate , inflation of prices of services and commodities.

After 1970, the rate of the number and percentage of US Immigrants was gradually
increasing, due to the gradual comeback of economic stability in US. We all know
that in a business cycle, which is illustrated as a wave, there will be no anymore place
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to go after a recession,(unless there will be a depression), but a comeback of

economic stability and progress. To further illustrate a business cycle, please refer to
the diagram below:

Table 2- The Business Cycle

Now,
let us
discuss the pros and cons that arises when a country (i.e: USA)
decided to import labor.

PROS

CONS

1. Increase in the number of units produced 1.

per unit of time.

Unemployment

rate

will

gradually

increase for slots for employment will be

- An additional unit of labor rendered in the taken up by foreign workers.

process of production means that there will
be an increase in the output produced over a
period of time.
2. Overseas workers tend to demand for 2. The cases of discrimination will be
cheaper labor cost compared to those evident as some states, particularly in the
nationals of the host country.

US, possess issue of racial discrimination

and unacceptance of immigrants with
different

races,

cultural

beliefs,

and

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philosophy.
3. Importation of skilled workers (workers 3. Purchasing power of the currency of the
who specializes in a particular field of host country will somehow weaken as
practice, i.e: welders, plumbers, etc.), tend dollars will be transferred from one place to
to yield lower cost in the long run than another. Let us remember that if a country
having nationals enrolled themselves into has an increasing trend it its dollar reserves,
training before deployment.

the purchasing power of the currency of

that country versus the US dollar is also

4.

Lower

cost

of

production

maximixation of capital will be achieved.

accumulative.
and 4. An increase in the number of consumers
of the natural resources of the host country
will increase.

Conclusion and Analysis

-

The demand of Migrant workers all over the world has been dominantly evident over
the passed years. As increase in technology and hunger for innovation has consumed
businessman, the need for fast but low-cost factor of production need to be supplied.
However, many things has to be taken to consideration when trying to import human
capital from the rest of the world. As competition for better pay and higher work
standards have been the bullet in the battle field of business, importation of labor has
been a no.1 option. To penetrate the marker of quality goods and services, one has to
produce the best quality at the shortest time, with the lowest cost, hence, the rest of
the world needs one another. Lets as always keep in mind that mathematically, the
equation for economic development contained NX as a factor, meaning, it is your
net export or quantifiable relationship with other countries.

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BIBLIOGRAPHY
US Labor Supply in the 21st Century- Katherine
Bradbury, Chrisopher L. Foote, Robert K. Triest
Wallstreet Journal, April 15, 2015
Business Cycle Graph- bennfx.wordress.com
Decenial Censuses for 1900 to 2000, American
Community Survey for 2010, released March 2015
www.let.rug.nl/usa- labor issues

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