2.7 The labour market

Question 1

Reasons for lack of labour mobility

Answer 1

• lack of necessary skills
• unable/unwilling to relocate
• information failure (not aware of available jobs)

Question 2

Define income tax

Answer 2

A tax levied on personal income

Question 3

Explain the interaction between workers and employers in the labour market

Answer 3

• suppliers of labour (employees) and buyers of labour (employers) interact in the labour market (which determines the wages of labour)

Question 4

Define net pay

Answer 4

The amount of money that an employee is left with after deductions are made from gross pay

Question 5

Factors affecting the demand of labour

Answer 5

-Wage rates (higher wage rates, less demand)
- Demand for products (increase demand for products, increased demand for labour)
- Profits of firms (if profit increases, firms expand and take on more labour)

Question 6

Explain the operation of the labour market

Answer 6

• operates on a local, national and international basis
• some jobs require specific qualifications/skill, others are geographically fixed
• depends on the exchange of information between employers and employees (on wage rates, employment conditions etc)
• lacks perfect mobility

Question 7

Define national insurance

Answer 7

A contribution paid by workers and their employers towards the cost of state benefits

Question 8

Define labour market

Answer 8

Where workers sell their labour and employers buy the labour

Question 9

Define gross pay

Answer 9

The amount of money that an employee earns before any deductions are made

Question 10

Explain the role of the labour market

Answer 10

• enables workers who are willing and able to sell their labour to meet employers who are willing and able to offer them a job
• determines the wage rate/salary for this work

Question 11

How to calculate net pay

Answer 11

net pay = gross pay - deductions (e.g. tax, insurance, pension etc)

Question 12

Factors affecting the supply of labour

Answer 12

• Wage rates (higher wage rates, more willing to work)
• Education/training (increased supply of skilled labour)
• Size of working population (more migrants/increased retirement age will increase supply)

Question 13

Define pension

Answer 13

A fixed amount paid at regular intervals to a person or their surviving dependents

Question 14

How to calculate gross pay

Answer 14

gross pay = base pay (* hours) + extra payments (e.g. bonuses, overtime etc)