Economics of Labour Assignment

In an economy, markets determine prices and quantities. In the labour market, prices refer to wages and quantity refers to the number of people employed. Relative wage levels are an extremely important device in our economy because of the way they allocate productive resources. Using Ceteris Paribus labour will tend to move to sectors where wage levels are highest. As such there are a number of methods by which wages and conditions are determined in the labour market.
The wage rate, in a free market would be determined by the forces of supply and demand. …