3.5.1 Flashcards
what factors determine the elasticity of labour demand?
- labour costs as a % of total costs
- ease and cost of capital substitution
- PED of good/service: if cost can be passed onto consumers
what factors cause shifts in labour supply?
- net inward/ outwrad migration
*
define labour supply
the number of hours people are willing and able to supply at a given wage rate
define demand for labour
quanitity of workers than an employer is willing and able to hire at a given wage rate in a given time period
derived demand for goods and services produced
what factors affect the derived demand for labour?
shift in labour demand
- labour productivity
- relative costs of using capital
- employment taxes (determine cost of hiring)
- demand for goods and services
- external macro-economic factors
define elasticity of labour demand
the responsivness of demand when there is a change in wage rate
Explain the 3 factors of elasticity of demand for labour
- PED of good/ service: if good has inelastic PED then so will labour becuase increase in wage costs can be passed onto consumers without chnages in quanity demanded
- ease & cost of factor substiution: if really easy and cheap to substitute and use capital then demand for labour is more elastic
- labour cost as % of total cost: is small proportion then more inelastic becuase doesnt matter as much
“Assess the likely micro and macroeconomic impact of technological change in a developed country of your choice.”
- One possible micro effect of technological change in the UK is a fall in jobs for people working in logistics businesses such as Amazon and DHL.
- This is because mobile robots are able to do the work of people who previously might have been employed in collection and packing.
- Installing robots is an example of capital labour substitution designed to increase productivity & lower the unit of costs of supplying products.
- If capital replaces labour, then the demand curve for labour shifts inwards leading to a contraction of employment
- And it might also lead to a fall in real wages in the industry. This is shown in my analysis diagram.
- If people lose their jobs because of automation, this might also cause an increase in structural unemployment due to occupational immobility
Although in theory, automation reduces demand for labour to perform routine tasks, in practice it also increases employment in and wages for workers in other jobs such as software engineering, training and robot maintenance. Indeed these jobs might offer median pay levels higher than in manual occupations. Much depends on the occupational mobility of labour force and also the extent to which automation, artificial intelligence and machine learning improves the competitiveness and trend rate of economic growth of a country. Rising prosperity creates new jobs that may not have existed a decade or more ago.
what factors affect the supply of labour?
- opportunities for extra pay: bonuses/ overtime
- wages is substitute occupations: eg increase in wages for plumers and electricians have made people switch-rationallity
- net migration of labour
- non-monenary factors: working conditions, opportunities for promotion, promotion, personal devlopment
- barriers to entry into maket
what is market failure in labour markets?
define geographical mobility
the ability of labour to move around a country/ region is order to find employment
what are the reasons for geographical immobility of labour?
- Family and social ties
- The financial costs involved in moving home including the costs of selling a house and removal expenses.
- Huge regional variations in house prices leading to a shortage of affordable housing in many areas
- The high cost of renting property
- Differences in the general cost of living between regions and also between countries
- Migration controls e.g. a cap on inward migration
- Cultural and language barriers
define occupational immobility
Occupational immobility occurs when there are barriers to the mobility of factors of production between different sectors of the economy leading to these factors remaining unemployed, or being used in ways that are not efficient
what are the causes of occupational immobility?
structural employment change caused by:
* decline of heavy manufacturing
* automation
* foreign competition of exports
* outsoucring production
what are policies to improve geographical immobility of labour?
- Reforms to the housing market designed to improve the supply and reduce the price of rented properties and to increase the supply of affordable properties.
- Specific subsidies for people moving into areas where there are shortages of labour – for example teachers and workers in the National Health Services
- improvements to transportation making it viable to travel long distances for work
what are policies to improve occupational immobility of labour?
- Invest in training schemes for the unemployed to boost their human capital to equip them with new skills and skills that can be transferred from one occupation to another.
- Subsidise the provision of vocational training by private sector firms to raise the skills level
“assess the likley micro and macro economic impact of technological change in a developed country of your choice”
Essay Question chains of reasoning
- one possible microeconomic effect is a fall in the jobs for people in logistics companies such as Amazon and DHL
- this is because mobile robots are able to do the work of people might have been previously employed in collection and packing.
- installing robots is an example of capital labour substitution-designed to increase productivity and lower the unit costs of supplying products
- if capital replaces labour, the demand for labout shifts inwards leading to a contraction in employment
- furthermore it may lead to fall in median wages in the industry as shown in my analysis diagram
- if people loose thier jobs because of automation then this may cause an increase in structural unemployment due to occupational immobility.
- Although in theory automation reduces demand for labour to perform routine tasks, in practise it also increases employment other jobs such as software engineering, robot maintaince and training. furthermore these jobs may offer a median pay levels higher than in manual occupation. this depends on the mobility of labour force
