3.5 Labour market Flashcards
what factors influence the supply of labour to a particular job?
(labour supply is derived for, the number of workers a firm needs is determined by the revenue they can produce + the elasticity of demand)
- wages in different substitute occupations
- barriers to entry
- improvements in job mobility of labour
- non-monetary benefits of certain jobs eg chance to live and work overseas
- net migration of labour
- demographic factors affecting the overall size of the working population
- people’s preference between work/leisure (flexibility)
non wage factors affecting labour supply?
- job secuirty
- career opportunities
- anti-social hours
- pensions
- strength of vocation
- quality of training/progression
- living and working overseas?
what does the elasticity of labour measure?
- the responsiveness of the quantity of labour supplied in response to a wage change
what affects elasticity of supply of labour to an certain occupation/industry?
- skills and qualifications required to work in an industry (length of education/training)
- vocational nature of work (in jobs like care or nursing people are less sensitive to changes in wages when deciding whether to work and how many hours)
- in the short run, supply curve for labour to a job tends to be inelastic
- takes time for people to be trained/respond to changes in relative wages
- when labour is geographically and occupationally mobile, labour supply tends to be relatively elastic even in the short term
reasons why geographical immobility of labour exists?
- family ties
- high cost of property
- migration controls
- language barriers
- financial costs of moving houses, regional differences in prices
- differences in cost of living in different places
what is occupational immobility of labour?
when there are barriers to the mobility of factors of production between different sectors of the economy leading to these factors remaining unemployed/inefficient
- skill gaps
- training gaps
- experience gaps, long term structurally unemployed often have gaps in their CV’s which make them less attractive to employ
- confidence and motivation, the longer someone is unemployed the more difficult it is to find work as skills decline
- discrimination, age, gender, sexual orientation and race
monopsony power of employers?
occurs when there is a sole/dominant employer in a labour market which means they have buying power over their potential employees ➡️ wage-setting power
what are disincentives in the labour market?
- the poverty trap affects people on low incomes who don’t want to work long hours because of the effects of the tax and benefits system
- the unemployment trap, the prospect of the loss of unemployment benefits dissuades them from taking a new job
what is the equilibrium wage rate?
- intersection of the supply and demand for labour
- employees are hired up to the point where the cost of hiring an extra employee is equal to the extra sales revenue from selling their output
- marginal revenue productivity is the market value of one additional unit of input
x axis - employment
y axis - wage rate
main causes of the differences in wages in different jobs?
- reward for risk-taking, poor working conditions and during unsocial hours
- reward for human capital, workers are compensated for costs of human capital acquistion
- different skill levels, market demand for skilled labours grows more quickly than demand for semi-skilled workers
- workers whose efficiency is high and generate revenue for a firm often have higher pay
- trade unions can use bargaining power
- employer discrimination eg to women who might have kids
what is the Gig economy?
- one definition of the Gig economy is when workers are given a certain task for a certain amount of time
- characterised by short-term contracts or free lance works
- eg Uber, Amazon, Hermes and Deliveroo
- 4% of UK working adults work in the gig economy, its rapid growth can be traced back to the last recession, less risky way for employers due to short term contracts
benefits of the Gig Economy?
for businesses
- reduced fixed costs (eg payroll expenses)
- reduced investment eg Uber drivers own their own vehicles
- flexibility in managing hours
for workers
- flexible/control over hours
- ability to work from home
- common way for people to earn extra income
- less risk of getting stuck in routine jobs
-
risks of the Gig Economy?
for workers
- doubts over the true flexibility
- lack of paid vacation/sick leave/employment rights
- job and incomes uncertainty make it difficult to get a mortgage
- inadequate investment in worker training
- worker bears most of the risk in their job
wider downsides
- shrinking of the tax base will impact revenues
- reductions in road safety/more accidents (deliveroo drivers using un-licensed vehicles)
- quality of jobs being made?
what are the effects of an ageing population?
- UK has 12.4 million people of pensionable age, predict that by 2041 there will be 16.3 million
micro - changing patterns of consumer demand
- impact on housing market, people live in their house for longer
- impact on labour market for different jobs
macro - more govt spending
- impacts productivity
- UK competitveness
impact of robotics and artificial intelligence on labour market?
2018 oxford study said that 47% of jobs are at high risk of being automated
micro
- productivity, costs and profits
- demand and supply of labour in specific jobs and wages paid
- consumer welfare eg lower prices and higher real disposable income
macro
- employment + unemployment
- competitiveness and exports and changing patterns of trade
- govt finances
