3.5 - Labour market Flashcards
Derived demand
3.5.1 - Demand for labour
Demand for a factor of production such as labour as a result of demand for the final product that that factor of production produces
Human capital
3.5.1 - Demand for labour
The amount of skill, knowledge, talent, experience and ability of workers. Human capital can be increased through education and training
Incentive scheme
3.5.1 - Demand for labour
A motivational scheme for employees, designed to encourage increased productivity/efficiency/working to the company objectives. Examples could include share schemes, bonuses, commission on sales, additional holiday, company car and formal awards
Income
3.5.1 - Demand for labour
The flow of earnings to a factor of production, Labour earns wages. Capital earns interest. Land earns rent. Enterprise earns profit.
Informal labour markets
3.5.1 - Demand for labour
Also known as the “grey” market, shadow economy, or black economy. This is the part of the economy that is not taxed or regulated by goverment, and therefore does not feature in the GDP statistics for that country. People working in the informal labour market are likely to be paid in cash, and may undertake work such as domestic cleaning/gardening, babysitting, car-washing and is characterised by unstable employer-employee relationships. Informal work is often vitally important to the poor
Discouraged workers
3.5.2 - Supply of labour
People out of work for a long time who may give up on job search and effectively leave the labour market. They become economically inactive. See hidden unemployment
Geographical mobility of labour
3.5.2 - Supply of labour
The ability of labour to move around an area, region or country in order to work. Geographical mobility is affected by things such as family ties, transport networks, transferable qualifications and common langauge
Labour supply (to an industry/occupation)
3.5.2 - Supply of labour
The labour supply is the number of hours that people are willing and able to supply at a given wage rate. The labour supply curve for any industry or occupation will be upward sloping. As wages rise, other workers enter this industry attracted by the incentive of higher pay
Non-pecuniary influences on labour supply
3.5.2 - Supply of labour
The notion that labour is supply is affected by factors other than wages or money, for examples, working conditions, the amount of leisure time, the facilities available at work, the sociability of the hours etc. Also known as non-monetary factors.
Pecuniary influences on labour supply
3.5.2 - Supply of labour
The notion that labour supply is affected by the wage rate and other monetary advantages, such as, perhaps, the ability to buy shares, or the existence of bonuses. Also known as monetary factors
Compensating (wage) differentials
3.5.3 - Wage determination in competitive and non-competitive markets
Higher may be eanred for relatively low skilled jobs if working conditions are unsociable, unplesent or dangerous, whereas lower pay may be eanred for higher skilled jobs if the working conditions are nice, flexible and safe
Demographic change
3.5.3 - Wage determination in competitive and non-competitive markets
Any change in the population, for example in terms of the average age, dependency ratios, life expectancy, family structures, birth rates etc.
Discrimination
3.5.3 - Wage determination in competitive and non-competitive markets
The different treatment of people as a result of factors such as age, gender, race, sexual orientation, ethnicity.
Earnings
3.5.3 - Wage determination in competitive and non-competitive markets
Earnings are made up of wages plus overtime pay, bonuses and commission
Economic rent
3.5.3 - Wage determination in competitive and non-competitive markets
Any amount earned by a factor of production, such as labour, above the minimum amount they require to work in a current occupation
Economically inactive population
3.5.3 - Wage determination in competitive and non-competitive markets
Those who are of working age but are neither in work nor actively seeking paid work
Effective marginal tax rate
3.5.3 - Wage determination in competitive and non-competitive markets
The effective marginal tax rate is the tax rate on each extra £1 of inomce - it also takes into account the impact of direct taxes (such as income tax) but also the possible withdrawal of means-tested welfare benefits if people take a paid job. A high effective marginal tax rate is the root cause of the unemployment trap, it creates disincentives to find work
Efficiency wage
3.5.3 - Wage determination in competitive and non-competitive markets
A theory that suggests it may benefit firms to pay workers a wage higher than their marginal revenue product. Paying a higher wage improves worker morale and can lead to a high quality of people applying for new jobs as they become available
Elasticity of labour demand
3.5.3 - Wage determination in competitive and non-competitive markets
Elasticity of labour demand measures the responsiveness of demand for labour (employment) when there is a change in the wage rate
Flexible labour market
3.5.3 - Wage determination in competitive and non-competitive markets
A labour market that adjusts quickly to changes in the demand for and supply of labour. Characteristics include flexible employment contracts and flexible pay
Full employment
3.5.3 - Wage determination in competitive and non-competitive markets
When there are enough unfilled job vacancies for all the unemployed to take paid work
Gender pay gap
3.5.3 - Wage determination in competitive and non-competitive markets
The difference between male and female earnings, usally expressed as a percentage of male earnings.
Imperfectly competitive labour market
3.5.3 - Wage determination in competitive and non-competitive markets
A labour market in which workers or firms have the power to set and influence wages and therefore wage determination occurs according to marginal revenue product theory. Imperfections in the labour market can include monopsony, trade unions, discrimination, poor imformation and skills shortages which can transfer power to workers (suppliers of labour) and allow them to demand higher wages in return for their labour
Labour market failure
3.5.3 - Wage determination in competitive and non-competitive markets
A labour market in which there is not an efficient allocation of resources. Reasons for labour market failure include:
* Discrimination
* Economic activity
* Skills shortages
* The action of trade unions
* The action of monopsony employers
* Labour immobility (geographical and occupational)