Labour Demand and Supply Flashcards
A labor marker
A labour market is where individuals seeking employment interact with employees who want to obtain the most appropriate labour skills for their production process
What is the labour of demand based from
The labour of demand is a derived demand from the demand for goods and services within the economy.
What are the influences on a firm’s demand for labour?
- The output of the firm (most significant)
- The productivity of the firm
- The costs of other inputs
Aggregate demand
Refers to the total demand for goods and services within the economy. Components of aggregate demand are; consumption (C), investment (I), government spending (G) and net exports (X-M)
What happens when the economy is strong?
The firm will produce more
The demand for labour will increase
Which is reflected in the business cycle
Why is there a time lag?
Firms tend to not always to utilise their resources and instead hoard labour - delaying making staff redundant
Productivity of Labour
The output per unit of labour per unit of time
Increase in productivity short run
Aggregate demand up - demand labour up
Aggregate demand same - demand labour down (EXCESS IN CAPACITY)
Aggregate demand down - demand labour far down
Increase in productivity long run
Labour-intensive production methods
- No use of technology (too expensive)
- Productivity up
- Labour Demand up
Technology (capital) production methods
- Productivity up
- Labour Demand down
- Cheaper in long run
Capital
Is the manufactured products used to produce goods and services, commonly described as “the produced means of production”.
What are the 2 choices of production?
- Using labour more intensively
- Relying more heavily on technology and automated process
Labour productivity
labour input
Effects of the introduction of capital
- Overall cost reduction
- Reduction of labor
What is the elasticity of labour?
ELASTIC when:
- Easy to substitute between labour and capital.
- Labour costs are a higher proportion of its cost
- Difficult for the firm to pass increased labour costs to consumers.
What are the 6 output factors?
- General economic conditions (aggregate demand)
- Conditions in the firm’s industry
- Demand for an individuals firm’s products
- Productivity of labour verse other inputs (capital/interest/tax)
- Cost of labour versus other inputs
- Cost of labour versus the cost of foreign labour
What are the 6 factors affecting the supply of labour?
- Pay levels
- Working conditions
- Education, skill, and experience requirements
- Mobility of labour: occupational and geographical
- Participation rate
- Other: goverment
How do pay levels affect supply?
The higher the wage/salary the more willing people are to supply their labour
Non-wage incentives such as a company car, and superannuation benefits
How does working conditions affect supply?
- Ability to travel
- Flexible working hours
- Opportunity to work from home
- Generous holiday leave entitlements
- Pleasent working environment
- Excellent training /experiences
- Meanignful / satisfactory work
Human capital
The total sum of the knowledge, skills, training, and experience of workers that contributes to the process of production. It reflects the “quality” of a labor force and it is the main influence on productivity growth.
How does occupational mobility affect the supply of labour?
If their is a higher degree of education and skills required for a particular occupation and more time is taken to move into that occupation then the moblity of the job is limited therfore limtied supply.
Occupational mobility
The ability of labour to move between different occupations in reposne to wage differntials and employmemt oppoertunites.
Geographical mobility
The ability of labour to move between different locations in reposne to improved wage differntials and employmemt oppoertunites.
What limtis geographical mobility?
- Cost of moving (transport, real estate costs, travel)
- Perosnal upheaveal assossicated with moving (family, children)
Geographical mobility affect on supply of labour?
- Less supply of la
Working-age popualtion
Is the number of people in an economy who are at least 15 years old
Labour force (workforce)
Consits of all the employed and unemployed perons in the country at any given time
Labour force particaption rate
The percentage of the civlian population aged 15 years and older who are in the workforce (either working or actavley seeking)
Labour force particaption rate equation
Labour force
—————————– x 100%
Population aged 15+
Why might people not work?
- Study
- Take care of family
- Want to rely on other forms of income
- Concentrate on lesiure activites
- Beilve they are unlikey to find a job
What may affect the participation rate?
- State of the economy (most important)
- Ageing population and age of retirement
- Social atttiudes (women)
- Increased school retention rates
Which professional associations limit their supply?
Doctor, engineer, and lawyer
How does government affect supply?
(entry into occupation and population)
Immigration and imposing certain qualifications and license restrictions
Unemployment
This refers to a situation where individuals want to work but are unable to find a job, and as a result, labor resources in an economy are not utilized.
What are the 2 most important aspects of a workforce?
- Size
- Quality
What affects the workforce?
- Size of population
- Age distribution
Charatsitics of being employed
- 15+
- Employed at least 1 hr per week
- Paid leave strike, workers comp
- Unemplued but actively seeking
Charatsitics of being unemployed
- Retired
- Under 15
- performing full-time domestic duties
- Full-time non-working student
- Without a job but available for ir not actively seeking (illness)
Natural increase
Excess in births over deaths in the population taken over a period of one year
Net migration
Excess of permanent new arrivals to our country over permanent departures over a period of a one year
Net migration
Excess of permanent new arrivals to our country over permanent departures over a period of a one year
What effects net migration?
Economic activity:
- Times of depressed economy and high unemployment government reduces migration.
- Strong economic growth and labor shortages the government will raise Australian migration quotas.
