Labour Market

Question 1

Individual Labour Supply

Answer 1

• Wage rate - opp cost of leisure time
• More working hours –> less leisure time
• Higher wage rate –> more working hours as they are more motivated - Substitution effect
• But, as incomes keep rising, encourage consumption of more goods and services, including leisure - Real income effect
• So graph is backward bending - vertical boomerang
• Workers may be motivated to work by other things than wage - job satisfaction, fringe benefits/non pecuniary benefits

Question 2

Industry Labour Supply

Answer 2

• People tend to work more when wage is relatively high - wages act as a signal to people which industries are offering the best returns to work
• The larger the size of the working age population and the higher the participation rate, the larger the industry labour supply
• Changes in wages between substitute occupations (hospitality and retail) can impact the industry supply
• Barriers to entry - the higher the experience and qualifications required for the role, the lower the industry supply as fewer poeple will be able to work in the occupation
• The greater the level of non monetary benefits the more willing people are to work in this occupation
• If overtime is available, workers are able to boost their income, increasing supply of labour

Question 3

Geographical Immobility of Labour

Answer 3

• Refers to when available jobs and available workers are not located in the same area
• Workers will have to travel to work - creating a cost - travel, leaving friends/family, new residence,

Question 4

Occupational Immobility of Labour

Answer 4

• Difficulty workers face in moving from one occupation to another
• Causes structural unemployment
• Creates need for retraining - people need to gain skils, exp, qualifications ot move to a different occupation

Question 5

Labour Market Issues

Answer 5

1. Zero-hour contracts - employees are not guaranteed work, and work only when needed by employer; unstable income, as working hours are not set
2. Discriminination - discrimination based upon gender, race, sexual orientation, disability - can impact potential pay or likelihood of getting hired
3. Education and training - employers need to pay apprenticeship levy as a form of tax to fund apprenticeships; subjects that students choose might limit potential skills needed in future
4. Shortages - farming, hospitality, construction, IT, healthcare industries facing shortgaes in UK - affected by Brexit, limiting immigration; low pay and poor career opportunities in these industries
5. Retirement - rise of life expectancy and better healthcare and no age discrimination has allowed people to keep wokring for longer - retirement age has increased