Chapter 13-15 Flashcards
The labour market: an example of a market in a mixed economy
The diagram in Figure shows the labour market for construction workers in a country. An increase in the demand for labour is shown by a shift in the demand curve for labour from DL1 to DL2.
(a) How does the increase in the demand for labour affect the wage rate in the market for construction
workers? (2)
(b) State two possible reasons for the increase in demand for construction workers in this country. (2)
(c) The country in this example is planning to encourage immigration. Explain briefly how this might affect the
supply of workers in the market for construction workers. (2)
(d) Explain how a firm operating in the construction industry would benefit from the division of labour. (4)
(a) The increase in the demand for labour from DL1 to DL2 increases the wage rate from W1 to W2.
(b) Possible reasons for the increase in the demand for construction works include:
- an increase in the demand for buildings and other construction projects
- an improvement in the productivity of construction workers
- a reduction in the costs of employing construction workers.
(c) If the country encourages immigration, this will help to raise the size of the working population. As a result, there should be more construction workers available for employment. This will increase the supply of construction workers in the market.
(d) A firm operating in the construction industry is likely to employ bricklayers, carpenters, roofers, plumbers and electricians, for example. These workers are specialists in their field. They will be skilled and competent. Taking advantage of the division of labour and employing specialists in this way will help a firm to improve its efficiency and make more profit.
In March 2013, Germany’s industrial trade union, IG Metall, sealed a deal to increase wages by 3 per cent for western German steel workers. As part of the deal, about 75,000 employees of the iron and steel industries in some German states will receive increased wages and additional job training.
(a) Explain briefly how workers will **benefit from additional training. ** (2)
(b) How are trade unions able to exert pressure on employers in order to raise wages? (2)
(c) To what extent can job losses be avoided when a trade union interferes in a labour market? (6) Notes: At least mention 3 reasons and explaination for each to justify your argument.
(a) If workers are well trained, they can do their job more easily. This improves their productivity and helps to remove any anxieties workers might have about their ability to do the job. Training is also likely to improve worker motivation.
(b) Trade unions can exert pressure on employers by threatening industrial action. If employers fail to reach agreement in a negotiation, trade unions could, for example, threaten to withdraw their labour. This would be highly disruptive and could result in heavy losses for a business.
(c) The diagram in (previous question) shows that trade union interference in a labour market can reduce the number of workers employed in that market—some workers lose their jobs.
However, the loss of jobs may be avoided. For example, if the productivity of workers improves at the same rate as wages increase, firms may employ more workers.
Employment might also be maintained if firms can pass wage increases on to customers by raising prices. Finally, workers may not lose their jobs if firms reduced their profit margins.
This suggests that job loss after trade union interference in a labour market is not unavoidable.
With the aid of an example, explain what is meant by the term division of labour. (3)
Tip: 2 marks are awarded for giving a correct definition and 1 mark is for describing a relevant example.
The production process is often broken down into small parts and each worker is allocated a specific task. This is called the division of labour and it can help improve productivity in business.
For example, on an assembly line in a car factory, tasks might include engine installation, brake installation, wheel installation and many other different assembly tasks.
State two possible advantages of the division of labour for workers. (2)
Possible answers include
- Workers become experts and can find employment more easily.
- Higher rates of pay can be earned if workers are experts.
- People may become more skilled and enjoy a higher status at work.
- People may enjoy more job satisfaction and may have better promotion prospects.
Do the advantages of the division of labour always outweigh the disadvantages for a firm?
Explain your answer. (6)
Tips:
Mention the at least 3 advantages and reasons for each, mention at least 3 disadvantages and reasons for each. Then your conculsion and resolution if any.
The division of labour can help to improve productivity, lower costs, and increase profits for a firm. One reason is because when workers focus on a specific task, they practise their tasks repeatedly and become experts. This improves their efficiency. Also, production time is reduced because workers do not have to move from one task to another. The opportunity to use specialist tools and equipment is also enhanced which helps to improve efficiency further.
However, there may drawbacks. The division of labour often means that workers have to carry out repetitive tasks which can become boring and demoralising. As a result, workers become de-motivated. This can lead to lower productivity and poor-quality work. A business may also lack flexibility if workers cannot be moved from one job to another when needed.
It could be argued that the advantages of the division of labour outweigh the disadvantages for a firm, provided that managers are aware of the problems and can take actions to overcome them. For example firms could find ways of motivating workers to keep them focused. They might give them regular breaks or offer financial incentives linked to their output. With effective motivational management, such problems can be resolved.
Which of the following will improve the quality of the working population? (1)
A Higher employment tax
B Investment in education
C Higher wages
D Less training
Tip: when answering multiple choice questions make sure you read ALL the responses before choosing your answer.
B is correct answer. Investment in education will help to improve literacy, numberacy and communication skills.
In 2010, 500,000 people were employed in the Canadian petroleum industry. This is expected to rise by about 10 percent in the next five to 10 years the demand for energy increases.
1. Why is the demand for petroleum workers likely to rise in Canada? (3)
2. Draw a supply and demand diagram to show the likely effect on the wages of petroleum workers of an increase in the demand for energy. (4)
3. Explain two factors that might affect the supply of petroleum workers in Canada. (4)
1. The demand for labour is heavily influenced by the demand for the product. In this case, the demand for petroleum workers in Canada is likely to rise. This is because a 10 per cent increase in demand for energy in Canada is expected in the next 5 to 10 years. Consequently, more petroleum workers will be needed to help meet this increase in demand.
2. see the attached image
When the demand for energy rises, there will be an increase in the demand for petroleum workers (this is a derived demand). As a result, the demand curve for labour shifts to the right forcing the wage rate up from W1 to W2. The number of workers employed rises from QL1 to QL2.
3. One factor which might affect the supply of petroleum workers in Canada is a change in the school leaving-age or the retirement age. If the school leaving-age falls, or the retirement age rises, the labour supply will rise. Another possible factor is the level of immigration. Canada has a reputation for welcoming immigrants and, when they arrive from abroad, an increase in immigrants will increase the working population.
In an attempt to improve the standard of living in the agricultural industry, a government introduces a minimum wage rate. On the diagram below, show the effect of the introduction of this minimum wage rate on wages and employment in the industry. (4)
see the attached image.
The figure shows a minimum wage will raise wages from We to Wm and reduce employment from QLe to QLm.
Tip: Remember that a minimum wage is always set above the equilibrium wage.
Introducing a minimum wage will:
A reduce the quality of labour
B reduce inflation
C increase pay for some workers
D not affect pay levels
C is the correct answer. The main purpose of introducing a minimum wage is to increase the pay of low-paid workers in the economy.
State two reasons for introducing a minimum wage. (2)
Possible answers include:
- to benefit disadvantaged workers
People such as women and low-income families may be better off on the minimum wage.
Poor families often rely on earnings from low-paying jobs. A minimum wage reduces poverty, because these families receive more money.
- to reduce poverty
- to help businesses.
A minimum wage should promote greater equality and fairness among workers. Therefore worker motivation will improve.
How far is it possible for trade union to increase wages and protect the employment of their members? Give reasons for your answer. (6)
When trade unions,TU, put pressure on employers, they may be able to gain an increase wage rates.
Pressure can be applied by TUs threatening industrial action, such as a strike, if their demands
are not met.
But higher wages often result in a lower level of employment. This is because at
higher wage rates the demand for labour falls. If the machine can replace worker and will be cheaper to run then workers will lose their jobs.
However, it may be possible to protect workers’
jobs if the wage increases were accompanied by improvements in productivity. This would
mean that more output is produced by the workers at the higher wage rates.
Also, a business may be able to charge customers more in an effort to recover some of the wage increase, instead of laying off workers.
A final option would be to accept a reduction in their profit margins. The firm’s response may depend on market conditions. For example if the market is not too competitive, a firm is likely to raise prices and not to lay-off workers. But, If the economy is in recession then it’ll be difficult for TUs to protect jobs, let alone increase wages.
Effects of strong trade unions on wages and employment
- Strong TUs may force up wages. (the bigger the number of workers who members the stronger the TUs)
- Trade unions can apply pressure on employers by threatening industrial action if their wage demands are not met.
- Employers may give in to trade unions to avoid disruption to their businesses.
- By forcing up wages, trade unions may also cause umemployment amongst their members. This is because employers may reduce demand for workers at the higher wage level.
*
How is it possible for trade union to increase wages and protect the employment of their members?
Job losses might be avoided when TUs drive up wages if labour productivity rises, if employers charge customers more or cut their profit margin.
Producton of natural rubber in India is dominated by small firms where there is little division of labour.
(i) Briefly explain one reason why small firms do not employ division of labour. (2)
- The farms are too small to have specialised workers.
- Lack of finance, inability to attract skilled workers
- Production of natural rubber in each farm is too small to benefit from division of labour.
- Difficult to break production down into separate tasks
- One worker is able to carry out the tasks
Identify two advantages of division of labour.
Any two of the followings:
- increase in productivity or total production / so wages and living standards may rise for the workers
- Less time required training workers / lower training costs
- Workers become more skilled at what they do through repetition and so become faster
- More efficient use of capital in production/ better use of the machinery and other tools
