5.3 - interaction of labour markets

Question 1

Wage Differentials

Answer 1

Difference in wages between workers with different skills in the same industry / between workers with comparable skills

Question 2

Trade unions

Answer 2

Provides an organisation for workers to have joint representation with employers

Question 3

Trade union objectives

Answer 3

Wage bargaining
Improvements in working conditions
Job security

Question 4

How can trade unions influence the market?

Answer 4

Limiting the supply of workers
Negotiate higher wages

Question 5

Strengths of trade unions

Answer 5

Increase in wages for workers
Increase in working conditions for workers

Question 6

Weaknesses of trade unions

Answer 6

Could lead to unemployment – firms willing to hire less for the new wage – increase in costs
Can increase cost-push inflation

Question 7

Bilateral monopolies

Answer 7

Occurs when there is only one buyer of labour and one seller in the market

Question 8

Strength of bilateral monopolies

Answer 8

Products are produced quickly

Question 9

Weakness of bilateral monopolies

Answer 9

Exploitation of workers / consumers

Question 10

Monopsony

Answer 10

A single buyer of labour in a market
Large firms employ a large majority of the labour
They are wage makers

Question 11

Strengths of a monopsony

Answer 11

Lower costs due to decreased costs of wages
Allows economies of scale

Question 12

Weaknesses of a monopsony

Answer 12

Lower wages for workers
Paid less than their MRP
Has a degree of monopoly selling power – higher profits due to exploiting consumers / workers
Worsened working conditions

Question 13

Labour Market Flexibility

Answer 13

How easy it is for workers to change jobs and choose different types of works
Firms find it easier to hire / fire workers

Question 14

Ways the gov increasing labour market flexibility

Answer 14

Reduce minimum wage
Increase training / education
Encourage immigration
Reduce legislation on labour market protection

Question 15

Strengths of labour market flexibility

Answer 15

Easier to find new work
Reduces unemployment

Question 16

Weaknesses of labour market flexibility

Answer 16

Income inequality
High costs of training new workers
Less job security

Question 17

Geographical immobility of labour

Answer 17

How easy it is to move between different regions

Question 18

Occupational immobility of labour

Answer 18

How easy it is to move between different occupations

Question 19

Personal labour mobility

Answer 19

Individuals’ ability to change occupation / where they live

Question 20

National labour mobility

Answer 20

A nation’s ability to change occupation / region

Question 21

Horizontal labour mobility

Answer 21

Ability to move to another job of a similar pay / work

Question 22

Vertical labour mobility

Answer 22

Ability to move up and down the employment hierarchy

Question 23

Strengths of labour mobility

Answer 23

More competitive labour market = stable wages
Increase productive capacity = economic growth

Question 24

Weaknesses of labour mobility

Answer 24

Higher structural unemployment
Can lead to downward labour mobility