3.5 Labour Market Flashcards
Demand for labour (definition and type)
= quantity of labour employers wish to hire at each possible wage rate
= derived demand as it is derived from demand for the product the labour produces (firms only want workers if ppl are willing and able to buy the product they produce)
Factors that influence the demand for labour: (diagram)
- price of good/service the worker is making (⬆️price = ⬆️ revenue so MRP of worker ⬆️ , ⬆️ productivity = ⬆️ demand)
- demand for final good/service produced (during boom, ⬆️ AD, firms must ⬆️ output to meet demand, if operating at full capacity, need to ⬆️ FoP (labour))
- labour productivity (⬆️ mrp = more efficient for firms to use workers instead of capital for production)
- price of capital (labour & capital substitutes in some industries, if price of capital ⬆️, demand for labour ⬆️ as more cost effective)
- improvements in tech (jobs lost as work done by machines, online working means less ppl needed, less buildings etc) BUT EVAL demand in tech based industries ⬆️)
- regulation (high regulation in labour market = discourages firms hiring as costly & time-consuming)
MRP
marginal revenue product
= measure of worker’s output
Immobility of labour (as a market failure in labour markets)
Geographical: unwillingness of labour to move to another location to seek work (family, high travel/accom costs, differences in cost of living), causes imbalance of labour supply in certain areas
Occupational: workers lack the skills and training required to transition to another job sector, often occurs during structural changes in economy & naturally as consumer taste changes (eg. transition period from manufacturing to services), = lack of supply for higher skilled jobs w more qualifications required (with higher wages so more inequality), gov intervention needed for training, info gap or benefits for workers
Supply of labour def
= ability & willingness of people to make themselves available to work at different wage rates
Factors influencing supply of labour (diagram)
- wage in substitute occupations
- barriers to entry
- non-monetary job characteristics
- improvements in occupational mobility of labour
- time
- size of working pop
- value of leisure time
The individual labour supply curve (diagram, what determines its shape)
Labour market equilibrium (diagrams)
D
Current labour market issues
F
Government intervention in the labour market: (list)
- maximum wages
- minimum wages
- public sector wage setting
- policies to tackle labour market immobility
Maximum wages (as a gov intervention in labour market)
D
Minimum wages (as gov intervention in labour market)
f
Public sector wage setting (as gov intervention in labour market)
F
Policies to tackle labour market immobility (as gov intervention in labour markets)
D
Significance of & factors affecting elasticity of demand for labour
F
