5. Labour Markets Flashcards
What does demand for labour show
The quantity of labour that employers would wish to have at each possible wage rate
How is the demand for labour derived
It is serviced from the demand for the product the labour produces, the firms only want the labour for as long as people are willing and able to buy the product they produce
Factors influencing demand for labour
Wage rates
Demand for the product
Prices of other factors of production
Tech
Regulation
PED of labour
Responsiveness of demand to a change in wage rate
Factors influencing PED of labour
-price elasticity of demand for the product
-proportion of wages to the total cost of production
-substitutes
-time
What does supply for labour show
The ability and willingness of people to make themselves available to work at different wage rates
Factors influencing the supply of labour
-wages
-population and distribution of age
-non-monetary benefits
-education/training/qualifications
-trade unions and barriers to entry
-wages and conditions of other jobs
-legislation
What is occupational mobility
Workers find it difficult to move from one job to another due to a lack of transferable skills (especially in the SR, LR they can undergo training)
Geographical immobility
Workers find it difficult to move from one place to another due to cost of movement, family etc
What can immobility cause
An excess supply of labour in one occupation/area and an excess of demand in another
What is PES of labour
Responsiveness of supply of labour to a change in wage rate
Factors effecting PES of labour
-level of training and qualifications required
-availability of suitable labour in other industries
-time (sr inelastic, lr elastic)
-vocation
What can wages differ with
Age
Education
Training
Experience
Skill/talent/ability
Sex (illegal)
Ethnic background (illegal)
In perfect comp, what are wages determined by
Purely by supply and demand and all workers are paid the same
What happens in perfect comp if people aren’t paid equally
Labour will move elsewhere where they can be paid higher wages
In a monopsony, why is the mc curve above the ac
If you raise one persons wage, you must raise everyone’s, therefore employing one more additional worker costs more than the average cost of labour
Where does employment occur
Where mc=d
Where are wages set in a monopsony
Where the q of mc=d meets the ac curve
How can monopolies increase wages
1) set barriers to entry, lowering supply
2) set wages to a specific rate and ensure workers are not willing to work for less
What is a bilateral monopoly
Where there is both a monopoly and monopsony in a labour market
Issues with the labour market
Skills shortages
Young workers
Retirement
Wage inequality
Zero-hour contracts
The ‘gig economy’
Migration
Pros of the minimum wage
Reduce poverty
Reduce wage differentials
incentive to work
increased productivity
government fiscal benefit
counter monopsony employers
Cons of the minimum wage
-unemployment (however if inelastic then it has less effect)
-the youth lose out the most due to lower MRP
-those not on minimum wage want a wage increase to keep their wage differential (they may see their job as higher skilled)
-increased cost for businesss
-regional differences (more expensive to live in the south)
How can you tackle immobility
Improve the supply of houses
Improve transport links
National advertising
Vocational training
Encourage further training
Training with work
why is the individual supply of labour curve backwards bending
-as wages increase at a lower wage, people work more time to increase their income
-as wages rise, the opportunity cost of not working rises until target income is reached
-beyond their target income, the worker substitutes their possible earnings for leisure
shifts of labour demand
change in price of product
change in demand of product
change in productivity
change in price of capital
shifts in labour supply
wages in substitute occupations
barriers to entry
non-monetary characteristics
changes in occupational mobility
overtime
size of working population
value of leisure time
wage differentials
-labour is not homogenous (different MRPs, different supplies, discrimination)
-non-monetary considerations (compensating wage differentials)
-labour is not perfectly mobile (occupational/geographical immobility, lack of perfect knowledge)
-trade unions
-monopsonies and wage setting abilities
men vs women wage differences
-women out of labour force due to pregnancy
-age where women leave labour force tends to be the pivotal age where promotions are most common
-difference in education
-women may tend to work in lower-paid occupations
north vs south divide
-restructuring of the economy after war
-different demands for labour (increased demand for services)
-negative multiplier effect for the industries in decline
-occupational and geographical immobility in the north
-higher skilled workers in the north may migrate south leaving lower skilled workers behind
pros of wage differentials
-incentives
-tricle down effect
-encourages enterprise
-encourages work, non benefits
-promotes efficient resource allocation
cons of wage differentials
-income inequality
-trickle down effect may not occur
-government solutions are limited if they are a monopsonies employer
