3.5.3 Non-competitive Labour Markets Flashcards
What real life scenario points out that there are labour market imperfections?
Wage differentials existing in markets
What are the 5 reasons for labour market imperfections existing?
- labour is not homogenous
- non - monetary considerations
- labour is not perfectly mobile
- trade unions exist and supply restrictions
- monopsonies can wage set
How is labour not homogenous?
People and firms have different MRPs. People have different skill sets and qualifications, discrimination exists between genders and ethnic groups.
What non-monetary implications do individuals need to consider?
Holiday time, working conditions e.c.t.
How is labour not perfectly mobile?
Occupational immobility and geographical immobility and a lack of perfect knowledge
What are the 6 current labour market issues?
- differences in formal education
- skills, qualifications and training
- pay gaps
- wages and skills
- gender
- discrimination
How does formal education lead to labour market issues?
On average, those with a degree earn more than those with just A Levels
How do skills, qualifications and training lead to issues in the labour market?
Jobs that require the most training often pay the most. Training workers is expensive for firms so they compensate by only hiring workers with skill already
How do pay gaps lead to labour market issues?
The wage gap between the skilled and unskilled has risen recently in the UK. This is due to technological change and globalisation
How do wages and skills lead to issues in the labour market?
Skilled workers produce a higher output than unskilled workers because they are more productive, so the demand for these workers increases.
How does gender lead to labour market issues?
Even with equal pay laws, women still earn less than men. This can be due to child bearing, more career breaks and fewer hours worked on average than men. Gender pay ceiling too!
How does discrimination lead to issues in the labour market?
Workers can be discriminated against on grounds of; gender, ethnicity, age and sexuality
What is the impact of migration on the labour market?
Inward migration (usually of working age) means a higher skilled workforce leading to higher productivity and output. Migration tends to affect those on the lowest incomes, by reducing wages, however the impact on the middle class is non-existent.
Is a monopsony of labour a wage maker or wage taker?
Wage maker
What professions, in the UK, work within a monopsony labour market?
Teachers and nurses (hired by the state)
On the monopsony of labour diagram, what happens to employment?
A monopsonist reduces employment from Q1 to Q. This is because their buying power can restrict output (workers).
On the monopsony of labour diagram, what happens to wages?
They fall from the free market equilibrium of W1 to W
On a monopsony labour market diagram, what happens to their perceived MRP and wage?
A workers MRP is at the DOT. Therefore they are getting a horrible deal in terms of wage compared to their skill
On a trade union labour diagram, explain the supply of labour curve….
As trade unions have bargaining power over wages, workers will want to supply more of their labour, where the wTU line intersects the SL line.
On a trade union diagram, what happens to wages?
Wages rise, obviously
Beneath the black dot on the monopsony trade union diagram, are workers happy?
Yes, because they were willing to work for less but their trade union has increased their wage
What does a monopsonist have to do with the trade union wage?
They HAVE to employ people at that wage (presuming it is strong)
Beyond the black dot, why do you get a kink in the AC curve of labour?
Because each worker has to be paid the same in a monopsonist market, the monopsonsist , to attract more workers, must raise the wage so therefore is reverts back to original supply curve
Why is there a vertical MCtu line in the monopsonist trade union diagram?
Because in a monopsonist market, the firm must raise the wages for EVERY worker, so at the higher wage rate it costs the firm more if they were to raise the wage
What happens to employment in a trade union controlled monopsonist market?
Employment rises from Q to Qtu (still beneath competitive equilibrium)
What happens to the wage in a trade union monopsonist market?
Wages rise from W to WTU
