Features of the labour market

Question 1

Definition of working population

Answer 1

people between the ages of 16 and 64

Question 2

definition of dependency ratio

Answer 2

the ratio of those ages 15 or below and 65 and above to the working population

Question 3

Definition of economically active

Answer 3

active in the labour force, including the employed, the self-employed and the unemployed

Question 4

Definition of workforce / labour force

Answer 4

people who are economically active, either employed or unemployed

Question 5

definition of participation rate

Answer 5

the percentage of the population in a given age group who are economically active

Question 6

definition of replacement ratio

Answer 6

the ratio of unemployment benefits to the wage that a claimant could receive in employment

Question 7

definition of minimum wage

Answer 7

legislation under which firms are not allowed to pay a wage below some threshold level set by the government

Question 8

Definition of living wage

Answer 8

an estimate of how much income households need to afford an acceptable standard of living (not to be confused with the National Living Wage – the highest rate of the National Minimum Wage in the UK)

Question 9

What effect does an increase in the minimum wage have on a perfectly competitive labour market?

Answer 9

Increases unemployment due to an increase in the labour supply relative to the demand

Question 10

What effect does an increase in the minimum wage have on a monopsonylabour market?

Answer 10

may have the effect of raising unemployment as shown on a trade union monopsony/ bilateral monopoly labour market

Question 11

What does the effect of a minimum wage depend on?

Answer 11

• whether its set above or below equilibrium

- how high it is set relative to current wages

Question 12

What does the value of a minimum wage depend on?

Answer 12

• productivity of workers

- inflation- often increases to reflect inflation and keep real wages positive

Question 13

What does the value/ enforceability of a living wage depend on??

Answer 13

Objectives- corporate social responsibility may prevail as firms try to help their workers, to increase living standards

inflation- falling costs of living may see a lower living wage than if the cost of living rose dramatically, due to higher standards of living

Location- the cost of living varies massively depending on the location of the firm and subsequent rent prices; higher living wage in London