Abstract
The demand for labor encompasses the determinants of the number of workers that firms and others wish to employ along with the intensity with which they are utilized, particularly their hours of work. Included is the demand for workers treated as a single group and for workers differentiated by their demographic characteristics and level of skill. Among the major issues are how employers react to changes in the cost of labor, or the cost of particular group(s) of workers; how cuts in costs of employing one type of worker lead employers to substitute them for others, and how the relative costs of workers and hours affect employers' choices between them. The theory underlying these issues is discussed and an evaluation of the state of knowledge on all of them is provided. The evidence is relevant for evaluating the impact of a wide variety of labor-market policies, including minimum wages, overtime restrictions and penalties, and payroll taxes. Labor demand takes time to adjust, with the path of adjustment determined by impediments imposed by the costs of hiring and firing and by government regulations. The article summarizes the evidence on the effects of these costs and on the role of government regulations in altering the level and time path of employment.
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