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What is a labour market?

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When people think of markets, they often think of a physical or virtual market where people exchange goods and services.  

But what is a labour market?

A labour market is a type of market in which “buyers” (employers) and “sellers” (job seekers) exchange services. As an employee, you exchange your talent and effort for remuneration in the form of a wage, salary, bonus, or other payment.  

In this context, the items exchanged in the market are your time, knowledge, skills, and abilities, all bundled together. Economists often refer to these as human capital.

Demand and supply in a labour market

Labour markets are driven by demand and supply. 

The number of workers organizations hire and want to hire indicates labour demand. The number of workers who are already hired indicates met demand, while the number of workers that organizations are trying to hire—but haven’t, yet—indicates unmet demand 

These measures of demand count individual people—but what is exchanged are the services people offer. 

Employers make decisions about their labour requirements based on many factors, including productivity (how much workers can produce and how quickly), costs (wages, pensions, training), and the results of workers’ efforts (output).  

This means that a wide range of factors affect the total demand for workers, including technology, group dynamics among workers, and expected future output. 

Labour supply typically refers to the number of people working or actively looking for work. Factors such as population size, retirement, migration, immigration, education and training, societal standards, economic conditions, and reproduction rates all influence labour supply.

Regional labour markets in Canada

All Canadian regions, municipalities, provinces, and territories have labour markets. These are unique and can overlap.  

There is an uneven distribution of labour supply among and between regions, subregions, and rural and urban labour markets. This is because labour supply depends on the size and participation rate of the local population, the pace of growth, and migration. 

The precise borders of these regional labour markets can fluctuate based on many factors. For example, people within commuting distance of a large city are more likely to participate in that city’s labour market, and people willing to migrate for quality work may be seeking opportunities outside of the region in which they live.  

As job conditions, wages, and demand fluctuate, the borders of labour markets also fluctuate as workers move in, among, and across different regional labour markets.

LMI helps us understand Canada’s labour markets

Labour market information (LMI) is data, research and any information that helps people make informed decisions about the labour market. 

The Labour Market Information Council (LMIC) works to empower all people in Canada with the knowledge and insights they need to succeed in a dynamic labour market.  

There are many ways LMI can help to prepare individuals, organizations, and institutions to navigate the labour market. LMI on occupations, for example, can help people make important decisions about study and training, first jobs, or the next step in their career. Quality and timely LMI also allows individuals, organizations, and institutions to prepare for the economy of tomorrow by projecting the future of work and encouraging development that can take the Canadian economy in new, productive directions. 

The best LMI provides information to make positive labour market changes that benefit everybody. 


Kashyap Arora contributes to multiple labour market-related projects, including identifying links between education systems and LMI, tracking green economy jobs, and assessing provincial and territorial responses to labour and skills shortages.

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