Labour Market

Question 1

Factors affecting supply of labour (3)

Answer 1

1) Net advantage of an occupation
2) Provision and quality of education and training
3) Demographic (population) changes

Question 2

Factors affect demand for labour (4)

Answer 2

1) Demand for goods/services
2) Productivity
3) Price and productivity of capital
4) Non-wage employment costs (other prod. costs)

Question 3

Supply of labour

Answer 3

Higher wage rates lead to workers willing to work more hours (normal supply curve). However, at a certain point, wage has reached a point that workers are satisfied and choose to relax even after wage rises (backwards bending supply curve).

Question 4

market wage

Answer 4

Equilibrium price for labour (where supply of labour = demand for labour)

Question 5

Factors affecting wage rate (3)

Answer 5

1) Relative bargaining power
If a trade union is more powerful they can bargain for higher wages
2) Age/Experience
Older workers are more experienced and hence can ask for higher wages
3) Level of education
Higher education can give more power to starting workers to ask for higher wages

Question 6

Minimum wage (2)

Answer 6

• Supports low income households
• Prevents firms from exploiting workers to lower prod. costs

Question 7

Benefits of minimum wage (3)

Answer 7

1) Workers recieve fair income in order to survive and afford the basic necessities
2) Workers who were not looking for a job because the wage was too low are now enouraged to look for a job
3) Low income households have more money to spend which may cause more economic growth

Question 8

Disadvantages of minimum wage (3)

Answer 8

1) Higher prod costs for firms –> invest in capital instead
2) Firms may have to increase prices –> may cause inflation
3) Oversupply of workers –> firms may be reluctant to hire more workers at higher wages and may even fire workers to lower prod. costs hence creating more unemployment

Question 9

Wage differentials –> Skilled v.s. Unskilled (3)

Answer 9

Skilled workers = higher productivity, output produced has more value + supply of them is lower

Question 10

Wage differentials –> Public v.s. Private sector

Answer 10

Public: Basic pay is higher
Private: Total earnings is higher because of bonuses & overtime

Question 11

Reasons for gender wage gap (3)

Answer 11

Women work shorter period of their life than men
Women usually work more part time jobs
Discrimation

Question 12

Agriculture v.s Manufacturing v.s. Service jobs

Answer 12

Derived demand influences wage rate significantly
Demand for skilled maufacturing or service jobs is higher that agriculture hence higher wage

Question 13

Wage differentials –> Old v.s. Young (3)

Answer 13

• More experience / better skills
• Hierarchy
• Living costs (need for higher earnings)