Labour market is a place of interaction of employers and workers as at this place employers compete with each other for finding the best employees whereas workers compete with each other for attaining the best satisfying jobs for themselves.
The labour markets can be at local, national and even at international level and their size in terms of workers depend on the scope of the market and are usually smaller groups with different qualifications, skills and geographical locations. The success of these markets is dependent on the level of exchange of information various employers and workers regarding wage rates, employment conditions, location for job and market competition.
The labour market works on the phenomenon of the workers availability in reference to the demand of workers in the market. in other words it can also be termed as an area of economic exchange workers take part of the sake of seeking best paying jobs and the potential employers take part for hiring best employers for their organizations. The labour market is said to be in ‘tight’ state when market has more jobs than the workers available for taking those jobs and the market is said to be ‘slack’ when there are more workers but no or less jobs in the market (Ostry, 2004). The labour market is said to be in balanced state when the supply of potential employees matches the demand of potential employees by the employers. It is a state of market in which neither excess nor deficit of labour is recorded nor as a result of this equilibrium state pay scales remain constant in the market.