3.5 Labour Market Flashcards
What is the labour market
- composed of sellers of labour, househoulds
- buyers of labour, firms
workers supply their labour and firms demand the labour
what is the demand for labour
derived demand, dependent on the demand for goods/services
- if the demand for goods/services increases then the demand for labour will increase
What factors influence the demand for labour
- the price of the product being produced
- the demand for the final product
- the ability to substitute capital for labour
- the productivity of labour
How does the price of products produced effect the demand of labour?
- if the selling price of the product increases
- the marginal product of labour increases
- thus the firm will demand more labour
- higher priced products incentivise firms to supply more and demand for labour will continually increase with increasing prices
how does the demand for the final product influence the demand for labour
- because its derived, when an economy is booming then demand for all goods and services will be high so the demand for labour will be high
- similarly when a recession occurs demand for g/s decreases so demand for labour will be lower
how does the ability to substitute capital for labour effect demand for labour
- firms evaluate if it will be possible or more cost effective to switch from using labour to capital
- if it is more cost effective then demand for labour will fall
how does the productivity of labour influence the demand for labour
- productivity increases lower average costs
- thus firms will most likely demand for more labour
What is the labour productivity
measures output per worker, total output/total workers
what are the competes of a labour market diagram?
y - wage rate
x - quantity of labour
D - MRP
S - MRC
what is the wage elasticity of demand
how sensitive is the demand for labour to a change in wages
What factors effect the PED for labour
- time
- substitutes
- elasciticty for demand of product
- proportion of total cost
how does time effect the PED of labour
- the longer the time more elastic
- the firm can replace labour with machines in long run
- short run contracts of employment may mean firms have no choice but to employ the same num of workers
- thus in short run more inelastic
how does substitureseffect the PED of labour
if its easier to change from labour to capital the demand for labour is more elastic
how does the elasticity of demand for the product effect the PED of labour
- if the ped is more elastic labour will be high as demand Is price sensitive so firms can’t absorb high wage costs
how does the proportion of total costs that are labour costs effect the PED of labour
the larger the proportion the higher the ped, more elastic
-e.g. labour-intensive industries
What is occupational mobility
the ability of workers to switch jobs
What is geographical mobility
the ability and willingness to move areas for job
what is the real wage rate
wages taking into account inflation
What are trade unions
- represent the interest of workers
- seek higher pay or better working conditions
- their power increases by collective bargaining
what are the 2 categories the supply of labour can depend on
monetary + non-monetary reasons
what are some monetary reasons for supply of labour
- wages
- bonuses
- commission
- performance related pay
What are the non monetary considerations that effect the labour supply
- job satisfaction
- location
- family commitments
- commuting
- suits lifestyle
what factors effect the supply of labour for a particular occupation
- skills and qualifications
- improvements in the occupational mobility of labour
- net migration of labour
how does skills and qualifications effect the supply of labour
- the person has to have the skills qualifications, experience to do the job
- supply of labour depends on how many people are able to perform the task
how does improvements in the occupational mobility of labour affect the supply of labour
- if more people are trained with necessary skills or qualifications (like GCSE’s) required to work in a particular occupations
how does immigration affect the supply of labour for a particular occupation
- a rising flow of people seeking work in the UK will increase the supply of labour in th eUK
- it can relieve shortages of skilled labour in areas such as NHS or education, or meeting seasonal demand for workers in agriculture or construction industry
