25 The interaction of labour markets Flashcards
Wage differentials
- difference in revenue creation of different workers
- difference in level of skills and qualifications
- difference in labour productivity
- difference in conditions of work
Impact of trade union on labour markets
Can lead to market failure and the strength of trade union can lead to market failure
-likelihoods of a strong trade union leading to market failure depends upon relative strength of the firm
Trade union
Collection of workers usually in the same or similar industry that collectively bargains for the workforce on issues like fairness of pay, working conditions and benefits
Monopsony
A single or dominant buyer of a product
Impact of a monopsonist employer on labour market
- a monopsonist employer can choose either the wage paid or the quantity of labour employed
- if profit maximising it will operate so MC=MR
- will operate at wage level and quantity of labour lower than the market
Bilateral monopoly
Labour market that includes a trade union and a monopsony employer
- pressure of trade union to increase wages is balanced by the pressure of the monopsonist employer to decrease wages
Labour market flexibility
Ability of workers to move between occupations and industries in order to respond to changes on wages and conditions of work
Mobility of Labour
Ability or workers to move geographically in order to respond to changes in wages or conditions of work
Government methods for increasing labour market flexibility and mobility
- education
- vocational education
- job training schemes
- infrastructure
- trade union reform
- technology
- legislation - (zero-hour contracts and redundancy laws)