A type of market where the object of exchange between buyer and seller is labor. In the case of the labor market, the buyer is the employer offering employment, and the seller is the employee receiving a certain salary for his work.

The labor market is shaped by the supply of labor and the demand for labor. Labor supply is the stock of labor – the total number of people already working or seeking employment at a certain wage. Labor demand is the reported demand for labor by employers, i.e. the number of people that employers are willing to hire by offering a certain salary. The most important factors affecting the demand for labor are the cost and productivity of labor and the demand for goods and services. Demand for labor is therefore derived demand – derived from the demand for products or services that labor is needed to produce.