chapter 9:labour demand and supply Flashcards
how is demand for labour derived
demand for labour differs from consumer demand for G&S bcos demand for labour is a derived demand ie when consumers demand G&S in eco, firms are forced to increaese their lvl of output to meet higher demand
what is the most significant influence on a bus’s demand for labour
its lvl of output - if it experiences high sales, it will increase production and therefore increase demand for labour
how do economic conditions correlate to labour demand
the higher the rates of economic growth the lower unemployement becomes and vice versa
in short, change in demand will occur as a result of fluctuations in the bus cycle
why is there a time lag b/w economic activity and level of employment
there is always a time lag b/w firms observing a pcikup in the lvl of demand and raising their demand for labour. This is due to the fact that firms tend to operate with excess capacity (hoard labour to avpoid having to train)
when AD increases, firms can satisfy higher demand in the short run by using their resources more intensively
however durign fall in AD buses delay making staff redundant in hopes of improving eco coniditons (avoid having to train new staff when production picks up)
what is the formula for labour productivity
labour productivity = total output/labour output
what does labour productivity depend on
the quality of the workforce ie its overall lvl of education, skills, health and desire to perform
and how effieciently labour can be combined with other factors of the production process
what can firms do if the cost of labour is relatively high
firms will use more capital (ie technology) inputs in the production process, and less labour and vice versa
ie capital is a substitute for labour; changes in the price of capital have a similar effect on the demand for labour
when will a firms demand for labour be more elastic (resposnsive to share price changes)
- labour costs are a relative high proportion of total costs
- when is it easy to substitute between capital and labour
- it is more difficult for the firm to pass on increase labour costs in the form of higher prices to consumers
- lbaour on-costs eg long service leave entitlements, sick leave, holiday pay, worker compensation, payroll tax, fringe beenfits tax and superannuation
workforce vs labour force vs working age population
workforce:
- 15+
- employed @ least 1 hour a week
- on paid leave, strike or worker’s compensation
- unemployed but are actively seek available work
labour force:
- over 15
- actively seeking work or employed
working age pop:
- 15+
what is the current supply of labour
the populations of industrialised nations are growing older, and with lower birth rates than in previous generations, there may be a shortage of skilled labour over the next two or three yrs
what factors affcet the supply of labour
- pay levels
- working conditions
- education, skills and experience requirements
- mobility of labour (2 occupational and geographical
occupational mobility: refers to the ability of labour to move between different occupations in response to wage differentials and employment opportunities
geographical mobility: refers to the anility of labour to ove between different locations in response to improved wage differentials and employment opps
what is the formula for labour force participation rate
labour force participation rate (%) = labource force/ population over 15
what short terma nd long term factors influence participation rate
short term:
- state of eco ie partici rate is pro-cyclical so in times of properity, ppl more inclined to actively seek work
- trends in ageing population
- changing social attitudes; female participation in workforce
- increased school retention rates
factors infleuncing workforce
- populations size: the larger the total pop, the greater the potential workforce
- pop growth influenced by two factors: natural increase and net migration (natural increase refers to excess births over deaths in the pop, net migration refers excess of permanent new arrivals to our country over permanent departure over a yr)
- the rate of net migration is strongly influenced by eco activity ie in times of depression and high unemployment, gov usually reduces migration intake to reduce the unemployment problem
- age distribution: the current age distribution is approx b/w 15-65 yrs
- education patterns: very important as it determines the qaulity of work that a nation provides
keep in mind the supply curve is standard while the demand curve operates in accordance to the law of diminihsing returns (the more u put the less valuable smth will be eg the more apple u eat the less it will taste good)
ie each worker will contribute less to total production that the previous worker - a profit maximising firm will only employ the extra worker if they accept a lower wage rate
