What is a labor surplus area in business?

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pohnpei397's profile pic

pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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In order to understand what a labor surplus area is, we have to look at the three words that make up this term.

First, we have the word “labor.”  This word refers to people who are willing and able to work in a given economic situation.  We call these people the pool of labor.  Second, we have the word “surplus.”  A surplus exists when the supply of a given product or resource is greater than the demand for it.  In other words, if there is more of something than people want, there is a surplus of that thing.  Finally, there is the word “area.”  This refers to a specific geographical place.  Putting these together, we can see that a labor surplus area is a geographical place in which there are more workers than there is demand for workers.  In such an area, there will be high unemployment because many people want to work even though there are not enough jobs for all of them.

The US government specifies which areas of the country are labor surplus areas.  It bases this designation on the unemployment rate in that area when compared to the unemployment rate in the country as a whole. 

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tyler-k's profile pic

tyler-k | Student, Grade 12 | (Level 1) Salutatorian

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From what I learned in my economics course this year, a "surplus" happens when there is too much of something, whether it is good or bad. A surplus of labor, then would be too many workers, and not enough jobs. This is what causes unemployment to be high in labor surplus areas. Basically, lots of people want jobs, but businesses don't have enough work for all of them.

sid-sarfraz's profile pic

sid-sarfraz | Student, Graduate | (Level 2) Salutatorian

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Labor Surplus Area (LSA) is a civil jurisdiction that has a civilian average annual unemployment rate during the previous two calendar years of 20 percent or more above the average annual civilian unemployment rate for all states during the same 24-month reference period.

Labor Surplus area is defined as an area of concentrated unemployment or underemployment.

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