Factors of production (Labour) Flashcards
Discuss the factors that are currently influencing the demand for labour in the Irish Economy. [25 marks]
Wage rate - In budget 2016, the government increased the minimum wage to nine euro and fifteen cents. This make labour less attractive to many businesses.
Trading Union involvement - During austerity many workers were forced to take pay cuts. As the economy is now performing well, unions are looking for pay restorations for its members.
Price of the other factors of production - Prior to employing additional units of labour a business will consider the price of the other factors of production. Interest rates are at historically low level, which makes capital more attractive than labour at present.
Demand for output - The Irish economy in a period of economic growth. GDP is forecast to be 4.8% this year, as a result businesses are employing additional units of labour to meet this demand.
Corporation tax rate - Ireland’s corporation tax rate at 12.5% is one one of the lowest in Europe. This helps to provide additional funds towards the hiring of labour
Discuss the factors that are currently influencing the supply of labour in the Irish economy. [25 Marks]
Wage rate - IN budget 2016 the government increased the minimum wage rate be 50cent to €9.15. This has helped to incentivise many people to make themselves available to work.
Size of the population - With the Irish economy performing well many individuals who emigrated during the recession are now returning to Ireland. As a result Ireland now has many more citizens within the working age bracket.
Participation rates - The number of people willing to work within the 16 to 65 age group has increased. People who took early retirement are now taking up part time jobs while more women are remaining in the work force after child birth.
Income tax - The government has reduced to top rate of PAYE to 40% and the marginal rate of taxation to below 50%. There is a greater incentive for people to make themselves available to work and to do overtime.
Labour mobility - The mobility of labour, particularly occupational mobility has increased in recent years. The government has increased the provision and accessibility of education and training courses.
The Demand for labour is exceeding the supply of labour in certain sectors of the Irish economy. Discuss the effects of this development on the Irish economy. [30 marks]
Upward pressure on wage rates - Wage rates would be driven higher where a shortage of labour exists. As a result some firms will experience a loss in competitiveness as these extra costs are passed onto consumers in the form of higher prices.
Deterioration of services - A shortage of labour in health and education will result in longer wait times in A&E departments and bigger classroom sizes.
Loss of investment - Multinationals may decide to relocation operations elsewhere. In addition indigenous firms would take a pessimistic view of labour shortages and postpone or abort any plans for investment.
Immigration - Labour shortages are reported internationally. As a result Ireland can expect an influx of immigrants from EU and Non-EU countries.
Training - To meet labour shortages the government will have to increase the provision and accessibility of training courses in order to provide workers with the skills the industry is looking for.
Discuss the factors that influence the efficiency/(MPP) of labour as a factor of production. [30 Marks]
Education/Training - The more educated a workers is and/or the longer period of training, the more efficient will be labour.
Degree of specialisation - If workers specialise in a small number of tasks, they will become more efficient in the performance of these tasks.
Quality of the other factors of production - If workers are using the most up-to-date capital goods, it will increase their efficiency.
Innate talent - Some workers possess natural ability which makes them more efficient than other workers.
Management - Some managers are better equipped at improving staff morale which leads to efficiency of labour.
Climatic conditions - If the workplace is adversely hot or cold it can have a negative impact upon the efficiency of workers.
Discuss the economic advantages and disadvantages of the government increasing the minimum wage rate to €9,15 in budget 2016
Advantages -
Higher standard of living - Low paid workers will receive a significant increase in their take home pay, which will help to alleviate poverty in many areas.
Economic growth - With the economy performing well, there should be an increase in consumption resulting in further economic growth.
Fall in unemployment - There is a greater incentive to join the labour force as the opportunity cost of not doing so has increased.
Disadvantages -
Inflationary pressures - Many businesses will past this increase in their wage bill onto consumers in the form of higher prices. For those businesses that are export orientated this may result in a loss in competitiveness.
Increase in unemployment - May SME’s will be forced to rationalise operations in an effort to cut costs and remain competitive.
Increase in the black economy - Many businesses may decide to pay some workers under the counter. This will result in a significant loss of tax revenue for the government.
Explain what is meant by the black economy.
Black economy - This is any economic activity that goes unrecorded and in not included in our national income accounts.
i) Discuss the impact that the black economy has on the Irish economy.
ii) Discuss methods that the Irish economy could adopt to reduce the shadow economy.
i) Loss of tax receipts for the government - The black economy is estimated to cost the exchequer €6 billion annually. This greatly impacts upon the provision of public services such as health and education.
Decline in legitament businesses - Those businesses who are not in the black economy may suffer a loss in sales to those who are. This may result in a loss of jobs in legitament businesses and the closure of others.
Increase in government expenditure - Extra government resources will have to used to try and curb the black economy. This is an opportunity cost as these funds could be used elsewhere.
Standard of products - Due to lack regulation, products that are purchased in the black economy may be unsafe/harmful to consumers.
ii)Reduce direct taxes - By reducing PAYE people will be more willing to declare their true levels of income.
Reduce indirect taxes - By reducing VAT, goods will become cheaper and so individuals will be less likely to buy contraband.
Media campaign - Media campaigns could be used to educate the public on the importance of their taxes to the running the state.
Better enforcement - The revenue commissioners should impose heavier penalty and fines on those individuals found participating in the black economy.
i) What is meant by occupational mobility of labour
ii) State and explain three factors that influence occupational mobility
iii) Discuss three policies that could be used to increase occupational mobility.
i) Occupational mobility of labour - This is the ease to which a worker can move from one job to another.
ii) Education - The more educated an individual is the greater will be their occupational mobility of labour.
Degree of specialisation - The more specialised a worker is, the lower is their occupational mobility.
Restriction on entry to certain occupations - There are restrictions on entry to law and medical professions in this country, which reduces occupational mobility of labour.
iii) Education courses - Increase the provision and accessibility of further education courses such as post leaving cert courses.
Training/retraining - Increase the provision and accesiblity of training courses by solas as this would allow workers to retrain for skills where labour shortages exist.
Trade Union Barriers - Reduce barriers to entry in certain occupations such as Irish hospital consultants
i) Explain what is meant by geographical mobility of labour
ii) State and explain three factors that influence geographical mobility
iii) Discuss three policies that could be used to increase geographical mobility
i) Geographical mobility of labour - This is the ease to which a worker can move from one location to another.
ii) Cost an inconvenience of movement - Many people are unwilling to take u job opportunities in Dublin due to very high rents and the prohibited price of property.
Parental relucatance to disrupt childrens’ education - If parents have their childrent in a very good school, theyre less likely to move due to the negative impact upon their child’s education.
Lack of awareness - Individuals will only move to take up job opportunites elsewhere if they know of their existence.
iii) Housing - The government needs to provide incentives to developers where a housing shortage exists. This may also involve relaxing planning laws in these areas.
Education - The government must invest in education to ensure a universal standard across the country. This would help to alleviate the concerns of parents.
Information - The government just ensure that the solas website is user friendly and updated regularly.
i) How appropriate is MRP for setting wages in the public sector
ii) Suggest an alternative method to calculating pay for public sector workers
i) MRP is not suitable for setting wages in the public sector for the following reasons.
Physical output - If someone is providing a service they do not produce any physical output, making it impossible to work out MRP.
Combination of capital and labour to produce physical output - Where a worker uses machinery or equipment to produce physical output, it is very difficult to determine what contribution each makes to this output.
Output not sold in market place - If the physical output produce is not sold in the market place, it is very difficult to calculate marginal revenue.
ii) Pay comparability - We consider those workers in the public and private sector with similar qualifications and set pay levels accordingly.
Discuss the factors which influence wage rates paid to different levels of workers.
Possession of innate talent - Some workers possess a natural talent which makes them more efficient than others, which in turn allows them to command higher wages.
Nature and conditions of job - Workers who have a dangerous occupation and/or work unsociable hours can command higher wages than those who do not.
Educational Qualifications - The more educated a workers is the greater will be their skill level, which will allow them to command higher wages.
Negotiating strength of trade union - Workers who are members of a strong trade union are more likely to get wage rates in line with their MRP.
Training - Workers who undergo longer periods of training will be more skilled/efficient and therefore command higher wages.
