3.5 Labour market Flashcards
3.5.1 A)
Define demand for labour
qty of labr that employers would wish to hire at each wage rate
3.5.1 A)
What is MRP
MRP is marginal revenue product, which is the extra revenue generated by an addition worker
3.5.1 A)
What is the significance for MRP
Determinds the dd for labour, ^MRP = ^dd for labour
3.5.1 A)
How can MRP be uneffective
Due to the law of diminishing marginal productivity means that workers are likly to be more productive at first and then fall off.
3.5.1 A)
Why is demand for labour downwards sloping
1) in the LR all factors of production vary, so high wage rate would encourage employeers to use machines instead of people
2) in the SR firms have fixed level of capital and due to law of diminishing marginal productivity, lower return per worker = v wage rate
3.5.1 A)
What is the formula for MRP
marginal output * price or change in total reveneue
3.5.1 A)
Factors that influence the demand for labour
Wage rates
Demand for the product
prices of other factors of production
wages in diff countries
tech
regulations
3.5.1 A)
Factors that influence the demand for labour
How does wage rates influence the demand for labour
Wages have same effect on dd for labour as price has on demand for a product. ^ wages = ^ dd for labour contracts. As MRP for labour must be high for it to be worthwhile to employ
3.5.1 A)
Factors that influence the demand for labour
How does Demand for the product influence the demand for labour
As dd for labour is derived from dd for the product.^ in dd for product = ^ dd for labour
3.5.1 A)
Factors that influence the demand for labour
How does prices of other factors of production influence the demand for labour
If machinery and equipment cheap, demand for labour falls
3.5.1 A)
Factors that influence the demand for labour
How does wages in diff countries influence the demand for labour
If wages are low in other countries, busniess may employ from those countries as it’s cheaper reducing busniess costs
3.5.1 A)
Factors that influence the demand for labour
How does tech influence the demand for labour
Improvement in tech leads to v need / dd for human labour. But demand for labour in tech industry rises
3.5.1 A)
Factors that influence the demand for labour
How does regulations influence the demand for labour
As regulations made some jobs are no longer needed and some new jobs are made. High regualations may discourage firms employing.
3.5.1 B)
What condition of demand is demand for labour
Derived demand, this is because firms hire workers to meet output / profit goals. Therefore an ^ in dd for the product leads to ^ dd for the labour of that product.
3.5.1)
What is price elastacity of demand of labour
Responsivness of the qty dd of labour to wage rate
3.5.1)
factors that influence PED of labour
1)Ped of the product
2)Proportion of wages to total cost of product ( ^ % ^ elastic)
3)subsitute machinery and labour in other countries (^ = ^elastic)
4) LR ^ elastic visa versa
3.5.2 A)
What is supply of labour
The ability and willingness of people to make themselves advailable to work at diff wage rates.
3.5.2 A)
Factors influencing ss of labour
wage
population
non-monetary benifits
education / training
trade unions / barriers to entry
wage and conditions
legislations
3.5.2 A)
Factors influencing ss of labour
How does wages influence ss of labour
^ in wage = ^ in hrs worked at first but beyond a certain point it will lead to v hrs worked
3.5.2 A)
Factors influencing ss of labour
How does population influence ss of labour
Needs a good distribution of age, ^ population = more people to work = ^ ss
3.5.2 A)
Factors influencing ss of labour
How does non-monetary benifits influence ss of labour
^ job satifaction will lead to ^ ss. Factors like hollidays, hrs of work, flexability
3.5.2 A)
Factors influencing ss of labour
How does to education / training influence ss of labour
More educated workers means higher lvl of supply of labour for these higher level jobs
3.5.2 A)
Factors influencing ss of labour
How does wage and conditons influence ss of labour
if many job in a local area are considered to be worse qlty. ss ^ for better one
3.5.2 A)
Factors influencing ss of labour
How does trade unions / barriers influence ss of labour
Trade union may be able to restrict the ss of labour by introducing barriers to entry
3.5.2 A)
Factors influencing ss of labour
How does legislation influence ss of labour
The govt rules can effecr ss of labour for example skl leaving age
3.5.2 B)
How can immobility effect labour
occupational as its hard to move jobs bcos lack of skls
geographical difficult to move from one place to another due to cost of moving or family.
can be excess ss of labour in one area and it cant be accessed even if wages are higher.
3.5.2 B)
Elasticity of ss
responsivness of ss to a change in wage
depends on level of qualification and training if ^ level of edu, ss of labour inelastic had to fill pos
3.5.3 A)
Wage Determination in a perfect competition
Therefore wage are determined purpley by dd & ss and all workers are paid the same if workers are not paided the same they would move to another industry
3.5.3 A)
Wage Determination in a inperfect competition
wages not set where dd = ss
3.5.3 A)
What is monopsony in the labour market
There is only one buyer of the labour
3.5.3 A)
Whats the significance of an monopsony in the labour market
to increase the work force they will need to increase the wage.
However increasing the wage for one means increasing for all.
MC > AC for new workers
Leads firms to have to employ where cost of employing is = to value of worker. MC = D.
3.5.3 A)
How would the signifance of an monopsony change in a perfect competitve market
they would employ less less people and for lower wages.
3.5.3 A)
How can a monopoly of the labour market occur
Due to trade unions, they sell all labour
3.5.3 A)
How to inc wage in monopoly labour market
Set a barrier to entry and it would reduce ss
Set wages at specific value and workers wont work for less, creating perfectly elastic labour ss so if they want to employ more they would need to pay more.
both lead to ^ wages but v employment
3.5.3 A)
Bilateral monopoly
Monopoly and monopsony in labour market. Firm is monopsonist and wants to employe lower wage.
Unions set min wage leads to new AC and MC. New wage depends on barganing strength of both sides
and factors like size of union & strength of economy. ( in recession unions have less power)
3.5.3 B)
Current labour market issues
Skill shortage
young workers
retierment
wage inequality
zero-hr contract
the gig economy
migration
3.5.3 B)
Current labour market issues
Skill shortage
Uk suffers from geographical and occupational immobility meaning even if there is enough jobs they are not in the right areas
3.5.3 B)
Current labour market issues
young workers
workers who join the workforce in a recession tend to recieve lower lifetime earnings
3.5.3 B)
Current labour market issues
retierment
rising life expectancy and an inc of people at reterment age means more govt money on welfare
3.5.3 B)
Current labour market issues
wage inequality
^ wage worker have their wage grow by ^ %
3.5.3 B)
Current labour market issues
zero-hr contract
employment problem as people dont know how much they will earn and they have short notice on when they work
3.5.3 B)
Current labour market issues
the gig economy
^self employment or short term contracts means less workers rights and reliable pay
3.5.3 B)
Current labour market issues
migration
v wages but ^ work pool choice
3.5.3 C)
govt intervention
What are the fors and against for national minimun wage
FOR
reduce povt
reduce labour turnover
motivated by money ^ productivity
AGAINST
loss of jobs
^ costs for compainies
wage spirals as people who earn above min wage also want a raise when min wage ^
3.5.3 C)
govt intervention
Max wage
-helps keep spending down in public sector
-Leads to excess dd as people wont step up to higher rolls if they dont think what they earn is worth it
-worker may move to other countries where wage is higher
-depends on the es of ss & dd
3.5.3 C)
govt intervention
Public sector wage setting
Trade union weak in SR so wage decision can be made to help improve budget
However in LR people will move to private sector
Therefore in the SR wage is diff but LR same
3.5.3 C)
govt intervention
Policies to tackle labour market immobility
^ ss of houses v price = easy to move, makes renting cheapr
improve transport links
national advertising to make job opp known
govt subsides houses in areas with labour shortages
education - vocational training , further education, training , edu can target skills that are in shortages.
