Labour Market 15th March

Question 1

Define labour supply

Answer 1

The labour supply is defined as the number of hours of work people are able and willing to supply at a given wage rate.

Question 2

Factors that affect the labour supply

Answer 2

Real wage rate
Extra Pay
Wages in substitute occupations
Barriers to entry 
Improvements in occupational mobility of labour 
Non monetary factors 
Net migration of labour

Question 3

Approximate net inward migration in 2015

Answer 3

300.000 people every year

Question 4

What is the main aim of supply side policies in the labour market

Answer 4

increase the active labour supply and therefore increase productivita

Question 5

Four main supply side policies

Answer 5

Income tax free personal allowance
Income tax threshold
Free childcare
Minimum wage

Question 6

Definition Marginal Revenue Product of Labour

Answer 6

Extra revenue generated when an additional worker is employed

Question 7

Where does a profit max. company employ?

Answer 7

Where MRPL=MCL

Question 8

What does the elasticity of demand for labour depend on?

Answer 8

Labour cost as a % of total cost
Ease and costs of substitution
Price elasticity of demand for the final product

Question 9

What does the effectiveness of the minimum wage depend on?

Answer 9

The elasticity of demand for labour

Question 10

Characteristics of a monopsony employer

Answer 10

Buying power of labour - giving them wage setting power

Question 11

Monopsony diagram

Answer 11

Downwards sloping Demand Curve
Upwards sloping Labour Supply and Average Cost of Labour Curve
Steeper upwards sloping Marginal Cost of Labour curve

Question 12

What are the two biggest unions in the UK

Answer 12

UNITE and UNISON both more than one million members

Question 13

How many people are part of a trade union in the UK?

Answer 13

6.56 million people in 2020, been rising for the past four years

Question 14

Union members in the UK are mostly part of which sectors?

Answer 14

public sector jobs

Question 15

What is the National Living Wage in 2022

Answer 15

April 2022, 9.50 pounds

Question 16

Define minimum wage

Answer 16

A statutory pay floor that cannot be undercut

Question 17

What does the impact of the Minimum wage depend upon?

Answer 17

Where it is set (how high) and the elasticity of demand for labour

Question 18

Which jobs are likely to have a elastic supply of labour

Answer 18

low skilled jobs- low entry barriers

Question 19

What is the wage premium for union members?

Answer 19

approx. 15%

Question 20

What are transfer earnings

Answer 20

Minimum reward to keep a factor of production employed in its current position, area below the labour supply curve

Question 21

What is economic rent?

Answer 21

area above the labour supply curve, any amount earned higher than the minimum required

Question 22

What is meant by “labour-shedding” or “downsizing”

Answer 22

Reducing the workforce in a recession-leading to cyclical or demand deficient unemployment

Question 23

What is income

Answer 23

a flow of money

Question 24

What is wealth

Answer 24

current value of a stock of assets

Question 25

Supply side issue related to unemployment

Answer 25

Structural unemployment

Question 26

When does structural unemployment occur?

Answer 26

When there is a significant change in the patterns of employment in an industry- for example automatisation or deindustrialisation

Question 27

3 Structural barriers to people finding work

Answer 27

Skil gaps- high costs of retraining
disincentives created by the poverty trap
unaffordable housing