The original motivation for writing Labor Economics grew out of my years of teaching labor economics to undergraduates. After trying out many of the textbooks in the market, it seemed to me that students were not being exposed to what the essence of labor economics was about: To try to understand how labor markets work. As a result, I felt that students did not really grasp why some persons choose to work, while other persons withdraw from the labor market; why some firms expand their employment at the same time that other firms are laying off workers; or why earnings are distributed unequally.
The key difference between Labor Economics and competing textbooks lies in its phi- losophy. I believe that knowing the story of how labor markets work is, in the end, more important than showing off our skills at constructing elegant models of the labor market or remembering hundreds of statistics and institutional details summarizing labor market conditions at a particular point in time.
I doubt that many students will (or should!) remember the mechanics of deriving a labor supply curve or what the unemployment rate was at the peak of the Great Recession 10 or 20 years after they leave college. However, if students could remember the story of how the labor market works—and, in particular, that workers and firms respond to changing incen- tives by altering the amount of labor they supply or demand—the students would be much better prepared to make informed opinions about the many proposed government policies that can have a dramatic impact on labor market opportunities, such as a “workfare” pro- gram requiring that welfare recipients work or a payroll tax assessed on employers to fund a national health-care program or a guest worker program that grants tens of thousands of entry visas to high-skill workers. The exposition in this book, therefore, stresses the ideas that labor economists use to understand how the labor market works.
The book also makes extensive use of labor market statistics and reports evidence obtained from hundreds of research studies. These data summarize the stylized facts that a good theory of the labor market should be able to explain, as well as help shape our thinking about the way the labor market works. The main objective of the book, therefore, is to survey the field of labor economics with an emphasis on both theory and facts. The book relies much more heavily on “the economic way of thinking” than competing text- books. I believe this approach gives a much better understanding of labor economics than an approach that minimizes or ignores the story-telling aspects of economic theory.