Chapter 4 - Labour Flashcards
Demand for labour
How many workers an employer is willing and able to hire at a given wage rate in a given period of time
Labour
It’s a factor of production
- Wages are the reward for labour - price of labour
Factors influencing DOL (which cause a shift)
Demand for product - derived demand
Productivity of labour
Price of the product
Wage rate
PED
Proportion of wages to total costs of production
Elastic: decrease employment
Inelastic: increase employment
Many substitues: elastic
Time
Supply for labour
Ability and willingness of people to make themselves available to work at different wages rates
Factors influencing SOL
Population and distribution of age
- EVAL: take into account those who are unemployed among those economically active
Net migration
Income tax
- EVAL: depends on whether it is progressive or regressive
Level of welfare benefits
Government regulations
- EVAL: fixed with immigration
Trade unions
PES
Responsiveness of supply to a change in wage rates
Qualifications increases: inelstic
Availability increases: elastic - poach workers
Time
- Long run: elastic
- Vocational: inelastic
Perfect competitive labour
Increase paid workers: decrease supply and increase MRP
Non competitive labour
Firm is a dominant/monopsonist buyer of labour
Firm is faced with a monopoly supplier of labour
Wage setting in public sector - MC is higher than AC
Trade unions
Increase job security
Push for higher wages
Geographical immobility
Barriers which prevent people from moving
Causes:
- family
- financial costs
- migration
- cultural and language barriers
Consequences:
- differences in wage rates
- differences in house prices
- firm stagnation
- low standards of living
Occupational immobility
Barriers to the mobility of FOP between different sectors of an economy
Causes:
- capital inputs - computers
- structural unemployment
Consequences:
- firms slow down
- unemployment increases
- wages increase: skill shortages
