3.5 Labour Markets Flashcards
What does the demand curve for labour show?
The quantity of labour that employers wish to hire at each possible wage rate.
What is derived demand in the context of labour?
The demand for labour is derived from the demand for the product that the labour produces.
What are the factors influencing the demand for labour?
- Wage rates
- Demand for the product
- Prices of other factors of production
- Wages in other countries
- Technology
- Regulation
How do wage rates affect the demand for labour?
As wage rates increase, demand for labour contracts since the MRP of labour must be higher.
What happens to the demand for labour if there is no demand for the product?
There is no demand for labour.
True or False: Improvements in technology can lead to a decrease in demand for labour.
True
What does price elasticity of demand (PED) for labour measure?
The responsiveness of the quantity demanded of labour to the wage rate.
What factors affect the PED of labour?
- Price elasticity of demand for the product
- Proportion of wages to total cost of production
- Availability of substitutes
- Time
What does the supply of labour curve show?
The ability and willingness of people to make themselves available to work at different wage rates.
List factors influencing the supply of labour.
- Wages
- Population and distribution of age
- Non-monetary benefits
- Education/training/qualification
- Trade unions and barriers to entry
- Wages and conditions of other jobs
- Legislation
What is occupational immobility?
Difficulty workers face in moving from one job to another due to a lack of transferable skills.
What is geographical immobility?
Difficulty workers have in moving from one location to another due to costs, family, etc.
What is the impact of immobility on the labour market?
It can create excess supply of labour in one area and excess demand in another.
What does elasticity of supply refer to?
The responsiveness of supply to a change in wage rates.
What are the wage determination factors in competitive markets?
Wages are determined purely by demand and supply.
What happens in a monopsony market?
There is only one buyer of labour, leading to higher wages for all if one wage is increased.
What role do trade unions play in the labour market?
They protect workers’ rights and pay through collective bargaining.
What is bilateral monopoly?
A market situation where both a monopsonist and a monopoly exist.
What are some current issues in the labour market?
- Skills shortages
- Young workers
- Retirement
Fill in the blank: The UK suffers from a severe _______ shortage.
skills
What effect does a recession have on young workers entering the workforce?
They tend to receive lower lifetime earnings compared to those entering during better times.
What is the impact of rising life expectancy on the government budget?
It increases welfare spending as pensioners make up over 50% of it.
What is a significant issue during hard economic times regarding employment?
Firms are unlikely to employ new workers but are reluctant to let go of current workers, leading to struggles for the young to get a job.
What demographic is contributing to rising government budget pressures related to retirement?
Pensioners, particularly as the baby boomers reach retirement age.
What percentage of welfare spending do pensioners make up?
Over 50%.
What is one of the main issues associated with wage inequality?
Those on the highest wages have seen their wages grow by a bigger percentage than those on the lowest wages.
What are zero-hour contracts?
Contracts where employees do not know how much they will earn each week and receive little notice of when they are required to work.
What is the ‘Gig economy’?
An economic sector where many people are self-employed and undertake short-term contracts.
How does migration affect the labor market according to the text?
It may cause a fall in wages but allows employers to recruit from a larger pool of workers and helps fill skills shortages.
What was the purpose of the National Minimum Wage introduced in April 1999?
To raise people out of poverty and establish decent minimum standards in the workplace.
What is the National Living Wage?
A wage introduced for workers over 25 years old, with a government pledge for it to be £9 by 2020.
List arguments for the National Minimum Wage.
- Reduces poverty by impacting lowest wages
- Reduces male/female wage differentials
- Decreases labor turnover
- Increases workforce motivation
- Provides an incentive to work
- Ensures fair wages
List arguments against the National Minimum Wage.
- Potential loss of jobs
- Increased costs for companies leading to higher prices
- Wage spiral effect
- Ineffectiveness in reducing poverty due to regional differences
What is the impact of the National Minimum Wage dependent on?
Where it is set in relation to current wages and the elasticity of supply and demand.
What are maximum wages?
Limits set on how much individuals, such as chief executives, can earn.
What is a potential consequence of introducing maximum wages?
Excess demand within the industry and a possible loss of the best workers.
What effect does the strength of trade unions have on public sector wage setting?
Weak trade unions allow the government to make wage decisions to improve the budget.
What was the impact of the public sector pay freeze from 2010 to 2015?
It put downward pressure on private sector wages.
What methods can the government use to improve geographical mobility of labor?
- Improve housing supply and affordability
- Enhance transport links
- National advertising for jobs
- Introduce subsidies in areas with labor shortages
- Move public agencies out of London
What strategies can improve occupational mobility of labor?
- Increase vocational training
- Encourage further study
- Promote workplace training
- Target education towards skills shortages
Fill in the blank: The government can also encourage _______ work patterns to allow more parents to work.
[flexible]
What can be done to reduce discrimination in the labor market?
Subsidize employers who hire unemployed individuals from groups with above average unemployment rates.
