5.3 The Interaction Of Labour Markets Flashcards
Why do wage differentials exist where people are paid different for the same job
Formal education
Skills, qualifications and training
Pay gaps
Wages and skills
Gender
Discrimination
What happens to labour with monopsony power
When there is only one buyer of labour in the market it is a monopsony. This gives firms the ability to set wages
What does the labour market with monopsony power diagram look like
What are the impacts of a monopsony employer
Employees lose out with lower wages meaning labour could be exploited. This is offset with trade union’s negotiating
Workers could be unproductive if wages are low
What happens to the labour market with trade union power
Trade unions pushing for higher wages above market equilibrium can make the market more flexible
Trade unions increase job security and protecting workers as well as working conditions and higher wages
Explain the impact of a trade union on monopsony power in this diagram
Monopsony power means wage rate W2 and Q2 is employed due to profit maximisation
Trade unions aim to increase wages to W3 to stop exploitation of labour
The perfectly competitive level of employment and wage rate is W1, Q1
How can imperfect information impact the labour market
Some qualified workers may be unaware of higher paying jobs in other industries or with other firms
Workers may not understand benefit of investing in improving skills and education
This can limit productivity and progress of workers creating market inefficiency
How can a bilateral monopoly impact the labour market with diagram
This is where there is one buyer and one supplier of labour
Buyer pays W2 and employs Q2
Trade union tried to negotiate higher wage of W3 without causing employment to fall
How is the labour market equilibrium determined
Determined where the supply of labour and the demand for labour meet
It determines the equilibrium price of labour the wage rate
What happens when the demand for labour falls
The wage rate would also fall as a result in a free market
What happens when the supply of labour increases
The wage rate would fall
What is meant by geographical mobility
This refers to the obstacles which prevent labour moving between areas
For example financial costs associated with moving and the regional variation of house prices and living costs
What is meant by occupational mobility
This refers to the obstacles that high prevent labour from charging their use
For example changing occupation needs transferable skills
