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MicroEconomics > 6 - Labour Market > Flashcards

6 - Labour Market Flashcards

1
Q

What is there an inverse relationship between in the labour market?

A

Demand for labour and the market wage rate.

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2
Q

Which organisations employ people?

A

Businesses and the government.

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3
Q

What happens if the wage rate is high?

A

It’s more costly for a business to hire extra employees.

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4
Q

What do lower wage rates mean?

A

Labour becomes relatively cheaper than capital.

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5
Q

What does a fall in the wage rate create?

A

A substitution effect between labour and capital - leading to an expansion in labour demand.

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6
Q

Why is demand for labour a derived demand?

A

It isn’t a direct or primary demand, it’s derived from the demand for goods and services labour produces.

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7
Q

Why do firms hire workers?

A

To produce goods and services which can be sold in the market.

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8
Q

What do firms need to do if they want to produce more products?

A

Hire more workers, as consumer demand increases.

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9
Q

What causes shifts in labour demand for an industry?

A

A rise in consumer demand, change in price of a product, increase in productivity of labour, employment subsidies which cut labour costs.

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10
Q

What is the marginal revenue product of Labour?

A

The extra revenue generated when an additional worker is employed.

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11
Q

What is the formula for MRPL?

A

Marginal product of labour x marginal revenue.

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12
Q

What does demand curve for labour tell you?

A

How many workers a business will employ at a given wage rate, coming from the estimated MRPL.

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13
Q

What are firms assumed to be?

A

Profit maximisers, and choose a level of employment which maximises profit.

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14
Q

When does MRPL fall?

A

When diminishing returns set in.

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15
Q

Where should profit maximising firms employ workers up to?

A

Where MRPL = Marginal cost of labour.

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16
Q

What are the limitations of MRPL?

A

Measuring labour productivity is difficult, collaborative work is difficult to measure, many products are the result of inputs drawn from different countries. Many people set their own pay.

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17
Q

Which factors affect wage elasticity of labour demand?

A

Labour costs as a % of total costs, ease and cost of factor substitution, PED for the final product, time period.

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18
Q

How do labour costs as a % of total costs affect wage elasticity?

A

Labour demand is more wage elastic when labour expenses are a high % of total costs.

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19
Q

How does cost of factor substitution affect wage elasticity?

A

Labour demand is more elastic when a firm can substitute easily between labour and capital inputs.

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20
Q

How does PED for the final product affect wage elasticity?

A

Determines whether a firm can pass on higher labour costs to consumers in higher prices.

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21
Q

How does the time period affect wage elasticity?

A

It’s easier for firms to switch factor inputs in the long run.

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22
Q

Which factors influence labour demand in construction?

A

Price of good or service, productivity of labour, cost and availability of substitutes.

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23
Q

How does the price of goods or services influence labour demand?

A

It’s more profitable for firms to produce products when the price is higher.

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24
Q

How does productivity of labour influence labour demand?

A

More productive workers produce more output per hour, and firms demand more labour.

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25
How does cost and availability of substitutes influence labour demand?
Firms will be less likely to demand labour at a given wage, if there are good substitutes for labour.
26
How does AI affect labour demand?
AI creates new jobs for engineers, programmers, and technicians.
27
What could AI allow smaller businesses to do?
Thrive and grow, as they benefit from easily accessible technologies.
28
What could AI do for markets?
Create new markets and industries, such as new medical treatments, new forms of entertainment.
29
What is the relationship between employment and wages?
Employment is sensitive to a change in wages, a large rise in wages causes a small fall in unemployment.
30
Which non wage factors affect labour supply?
Job risk and job security, career opportunities, anti social hours, generosity of occupational pensions, strength of vocation, working conditions, quality of training, opportunity for living and working overseas.
31
What is the Labour supply?
Measures the hours that people are willing and able to supply at a given wage rate.
32
Why is the labour supply curve usually upward sloping?
As wages rise, other workers enter the industry, attracted by the incentive of higher pay.
33
What does the extent of a rise in wage depend on?
The elasticity of labour supply.
34
What does W0 represent on a labour supply graph?
The reservation wage.
35
What is the reservation wage?
The lowest pay rate at which people are willing to work in an occupation.
36
Which factors affect labour supply in an industry?
Real wage rate, extra pay, wages in substitute occupations, barriers to entry, improvements in the occupational mobility of labour, non monetary characteristics, net inward migration.
37
What are the causes of an outward shift of labour supply?
Rise in net inward migration of workers with relevant skills. Impact of extra investment in human capital, fall in relative wages in substitute jobs, demographic trends.
38
Which factors affect wage elasticity of labour supply?
Nature and skills of qualifications to work in an industry, vocational nature of work, time period.
39
How do skills to work in an industry affect wage elasticity of labour supply?
Specific skills and educational requirements make supply inelastic. Length makes labour supply inelastic. When the minimum skill factor needed is relatively low, the pool of available labour is large, making labour supply elastic.
40
How does the vocational nature of work affect wage elasticity of labour?
Less sensitive to changes in wages in jobs such as nursing.
41
How does time period affect wage elasticity of labour?
Labour supply tends to be inelastic in the short run. Takes time for people to respond to changes in relative wages. When labour is geographically mobile, labour supply is relatively elastic.
42
Why is labour supply elastic in lower skilled jobs?
Because a pool of labour is available to be employed at a constant market wage rate.
43
Where is labour supply more inelastic?
Where jobs require specific skills and training.
44
What are the causes of occupational immobility?
Skills gaps, experience gaps, education gaps, low confidence.
45
What is occupational immobility?
Occurs when there are barriers to people being able to switch between one job and another.
46
What are Training gaps?
Unemployed workers may not have access to affordable training schemes that would allow them to improve their human capital, improving employability.
47
What are degree apprenticeships?
Higher education courses combining working with part time study. Students benefit by getting a degree without debt.
48
What are the causes of geographical immobility?
Housing costs, Family and social ties, educational institutions, cost of living, limited access to transportation, visa restrictions.
49
How do housing costs cause geographical immobility?
Workers may be hesitant to move to areas with expensive housing, even if jobs are more abundant.
50
How do family and social ties cause geographical immobility?
Moving away from friends and family can be emotionally challenging.
51
How do educational institutions cause geographical immobility?
Families may be reluctant to relocate, as it means disrupting their education.
52
How does cost of living cause geographical immobility?
High living costs, healthcare, childcare, can discourage individuals from relocating to areas with a higher cost of living.
53
How does limited access to transportation cause geographical immobility?
In less densely populated areas, limited access to public transportation can make it challenging for individuals to commute to work.
54
How do visa restrictions cause geographical immobility?
Mobility across borders can be affected by imposing work visa restrictions.
55
What is the average rent across the UK?
London - £2003. SE - £1277. UK - £1199. WM - £886. Scotland - £868. Wales - £811. NI - £799. NE - £645.
56
Which industries are dependent on net inflows of workers from overseas?
Agriculture, hospitality and tourism, health and social care, construction, transport.
57
Why do labour market dynamics change over time?
Due to factors such as changes in immigration policy and global events.
58
What have the changes in migration data over time been?
1964 - - 20,000. 1994 - +25,000. 2014 - +350,000. 2022 - +600,000.
59
Which industries are currently experiencing labour shortages?
Nursing, plumbers, cooks, HGV goods drivers, welders.
60
Which policies can improve Geographical Immobility?
Rent controls to improve rights of tenants, increases in new housebuilding with legal requirements for constructing affordable homes, infrastructure investment.
61
Why does unemployment occur with a minimum wage?
The failure of wages to adjust flexibly to changes in labour demand and supply.
62
Why does the supply of labour expand under the minimum wage?
More people are attracted to work at the higher legal pay floor.
63
What happens to employment if labour demand is found to be wage elastic?
Employment falls.
64
What is Labour market discrimination?
Occurs when employers make decisions on wages and employment, based on prejudices such as race, gender, religion, disability, social class, accent, age, height.
65
What does labour market discrimination lead to?
Big variations in wages for the same job and different employment rates within a population.
66
What are the types of discrimination in the labour market?
Gender discrimination, Racial discrimination, Age discrimination, Sexual orientation discrimination, Socioeconomic discrimination.
67
What is Discrimination the result of?
Deep rooted information failure and prejudice.
68
What does Labour market discrimination cause?
Resource misallocation, Increases in inequality, which has social costs. Leads to scarce human resources being under utilised.
69
What does a lack of diversity in the workplace cause?
Hampering of innovation and productivity.
70
What does Discrimination lead to, according to the diagram?
A contraction un employment, lower wages for the discriminated group.
71
Which sectors have the largest Gender pay gaps?
Finance - 31.2%. Education - 22.2%. Scientific - 19.9%. Real Estate - 14.6%. Administrative Sectors - 6.3%.
72
What is the Gender Pay Gap?
The difference in average earnings between men and women in the workforce.
73
Which factors explain the gender pay gap?
Age and the glass ceiling , Occupational clustering effects.
74
How does Age and the glass ceiling affect the gender pay gap?
There is a gap between full time employees aged 40 and over, linking to many women taking a career break, due to having children.
75
How do Occupational clustering effects explain the gender pay gap?
In many jobs, pay is relatively low with limited union representation, and these industries have many women working in them.
76
What are the policies to tackle labour market discrimination?
Anti Discrimination laws and regulations, Affirmative action, access to quality education and training.
77
How does Anti discrimination law tackle labour market discrimination?
Enforcing and strengthening existing anti discrimination laws that prohibit discrimination based on factors such as race and gender.
78
How does Affirmative action tackle labour market discrimination?
Requires employers to implement affirmative action plans and diversity initiatives, aimed at increasing the representation of under represented groups in the workforce.
79
How does Access to Quality education and training tackle labour market discrimination?
Invest in education and training programmes that address skill gaps, and provide opportunities for individuals from marginalised groups to acquire the skills needed to access higher paying jobs.

MicroEconomics (17 decks)

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