hot topic: labour market

Question 1

what are the types of market failure in the labour market

Answer 1

• occupational immobility
• geographical immobility

Question 2

what does labour immobility lead to(2)

Answer 2

• excess supply in one industry(results in lower wages)
• excess demand in another(higher wages)

Question 3

what is the wage determination in perfect competition

Answer 3

• wages are determined by supply and demand(if workers are not payed the same then they would move to another industry)

Question 4

what is the point where monopsonies employ labour

Answer 4

at MC= D

Question 5

what are the arguments for national minimm wage

Answer 5

• fair wage for everyone
• reduces poverty(targeted at lower income groups
• more content workforce(assumes everyone is motivated by money)

Question 6

arguments against the national minimum wage

Answer 6

• raises costs for companies

Question 7

benefits of maximum wages(2)

Answer 7

• reduces inequality
• reduces the costs for firms(public sector)

Question 8

what are the downsides of maximum wages

Answer 8

• loss of best workers(can lead to loss of competitiveness)

Question 9

what are evaluation points for max and min wages

Answer 9

• depends on elasticities for supply and demand for labour

Question 10

what are the wages in the public secotr determined by

Answer 10

• the wages in the private sector(if wages are too low in the public then workers move to private -> so public secotr increases wages)

Question 11

what are interventions to labour immobility

Answer 11

• improve the supply of houses/ reduce the price of properties
• encourage further education(encouraging engineering degrees -> since there was a shortage)

Question 12

what are the 2 conditions for TU in a monopsony market

Answer 12

• TU controls the supply of labour
• strong TU make smonopsony a wage taker

Question 13

what is the point where monopsonists stop hiring workers

Answer 13

MRP(D) = MC

Question 14

what is evaluation point for TU in monopsonies

Answer 14

• depends on the trade union density(power)
• however wages that are too high can lead to inefficiencies in the market(wages>MRP)

Question 15

what are the benefits of trade unions for workers(2)

Answer 15

• workers receive higher wages compaed to non- trade union workers
• better non-wage benefits such as guaranteed lunchbreaks(which can increase productivity)

Question 16

what are the cons of trade unions to workers(3)

Answer 16

• workers do not get payed whilst on strike
• can disrupt economikc activity whilst workers are on strike
• can result in conflicts between management and workers

Question 17

what are the pros of trade unions for firms(2)

Answer 17

• training from trade unions increases workers productivity which decreases costs
• empowerment results in higher motivation( less sick days -> greater output for the firm)

Question 17

what are the pros of trade unions for the economy/ government(3)

Answer 17

• trade unions help create a more equal society
• a firms profits increase due to increased productivity(more corporation tax)
• higher wages(more income tax)

Question 18

what are the cons of trade unions for the economy/ government(3)

Answer 18

• industrial actions reduces output and firm’s profits(less tax)
• industrial actions may be disruptive to people’s lives especially in rail(getting to work)
• MNCs may be more reluctant to invest(high amounts of industrial action)

Question 18

what are the cons for trade unions for firms(2)

Answer 18

• meeting unions demand can lead to increased costs(reduced output and profits)
• management styles need to be less authoritive which mnagers may find it hard to accept(which may becrease managerial forces-> less pressure)