Labour Market 2 Flashcards
What is the labour supply
The number of hours that people are willing and able to supply at a given wage rate
What does an outward shift of the labour supply curve mean
More people are willing and able to work at a given wage rate
Why would people become more willing and able to work (shift in supply)
- migration
- fall in earnings of substitute occupations
- lower entry barriers to this job
- demographic factors
What does an inward shift in labour imply
Fewer people are willing / able to offer themselves for work in a five occupation at the prevailing wage rate / salary
Causes of an inward shift in labour
- brain drain effects
- decline in non-monetary rewards
- fall in pay
Key factors affecting labour supply to a job / occupation
- wage rate (compared to other jobs)
- qualifications
- non-monetary characteristics
- net migration of labour
- demographic factors
- preferences
Non wage factors influencing supply
Risk Opportunities Anti-social hours Pensions Contract Training Overseas
Determinants of elasticity of labour supply
Skills / qualifications
Vocational nature of work
Time period
Elasticity of labour when geographically and occupationally mobile
Relatively elastic - even in the short run
Elasticity of labour in the SR
Relatively inelastic
Elasticity of labour in strongly vocational jobs e.g. nursing
Less sensitive (less elastic) to changes in wages
When does occupational immobility occur
When there are barriers to the mobility of factors of production between different industries leading to these factors remaining unemployed or inefficient
Why does geographical mobility exist
Family and social ties Financial costs Migration caps Cultural / language barriers Default behavioural instinct
Why may people living in high-price areas want to stay
Gain from house price inflation
Where employees hired up to
The point where the extra cost of hiring an employee is equal to the extra sales revenue from selling their output
Causes of pay / earnings differentials
- compensating wage differentials
- reward for human capital
- different skills levels
- differences in productivity and revenue creation
- trade unions
- employer discrimination
When does a monopsony employer occur
When there is a sole or a dominant employee in a labour market
What power does a monopsony employer have
Wage-setting power
For a monopsony what does the supply curve of labour equal
The average cost of labour
How does a monopsony employer attract new workers
Bid up wages
Why may increasing the wages by a monopsony employer not attract new workers
The wage they pay will not necessarily reflect the true marginal revenue product of people employed
Examples of monopsony employed
NHS
Armed forces
Amazon
Where is profit maximising employment level
MCL = MRPL
