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Economics > Labour Market > Flashcards

Labour Market Flashcards

1
Q

What are the 2 Free-Market Decision Makers?

A

Households/Individuals

Firms

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2
Q

Define Commodities

A

Goods or Services

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3
Q

In the PRODUCT MARKET, what 2 things flow between Households + Firms?

A

Goods + Services

Income

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4
Q

In the FACTOR MARKET, what 2 things flow between Households + Firms?

A

Income

Labour + Capital (Investments)

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5
Q

What is the Governments role in the Factor + Product Markets?

A

Establish an Environment for the Interactions to take place

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6
Q

Who are the 3 actors in the Labour Market?

A

Households
Firms
Government

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7
Q

What decisions do Households make?

A

When to enter Labour Market
Which Occupation/Industry to work in
How many hours to work
Whether to Quit or Retire

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8
Q

What decisions do firms make?

A

How many workers to hire
When to layoff workers/close plant
Pension/Retirement Policy

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9
Q

How does a Government establish an environment of a Market?

A

Unemployment Insurance- Benefits
Worker Compensation
Laws to Protect Workers + Firms

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10
Q

Who DEMANDS Labour?

A

Employers / Firms

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11
Q

Where do Employers Demand Labour up to?

A

Up to point where Benefit = Price they Pay

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12
Q

What is the benefit of Labour to an Employer?

A

Value of the G/S produced

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13
Q

What is Marginal Revenue?

A

Extra Revenue due to Product of Labour
Declines as more Labour is employed- Diminishing Marginal Returns
In S.R- additional labour Increase Output at a slower Rate
In L.R- all FoPs are variable- allows Expansion

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14
Q

What are 3 factors that affect Demand for Labour?

A

Consumer Demand- Derived Demand- Increased Consumer Demand for G+S–> Increased D for Labour
Productivity of Labour- can be affected by Technology
Non-wage Costs of Hiring labour- Employer Taxes- N.I
–Ease of Laying off workers/Reducing Wages

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15
Q

Factors affecting Supply of Labour

A

Depends on Individual’s Skill- Training can Increase Supply
Outside options- e.g. Unemployment Benefits may be more attractive
Migration- Immigration can Increase Supply–> Reduce Wage Rate
Non-Monetary Characteristics- e.g. Working Conditions, Vocational aspect
Labour Market Regulations- Unions + Professional Bodies–Restrict Supply

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16
Q

Where does Equilibrium occur in the Labour Market?

A

At Wage Rate + Employment Level where D=S

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17
Q

In a Free Market, how much Unemployment should be Expected?

A

No Unemployment- Wages would fall until Market clears

If Wages can’t fall- Demand for Labour Falls causing Unemployment

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18
Q

Name the 3 main things that affect Labour Supply

A

Population Growth
Participation
Education Decisions

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19
Q

Name 2 main Factors that Influence Labour Demand

A

Labour Costs

Output Prices- e.g. Free Trade

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20
Q

What are the 3 Factors that Influence Market Outcomes?

A

Degree of Competition
Unemployment
Unions

21
Q

What are 5 Key Indicators in the Labour Market?

A 
Unemployment Rate
Labour Force
Participation Rate
Earnings/Wage Rate
Labour Productivity
22
Q

Define Unemployment Rate

A

Percentage of Labour Force without a Job but registered as willing + able to work

23
Q

Define Labour Force

A

those Holding a job or registered as being willing + able to work

24
Q

Define Participation Rate

A

Percentage of Population of Working Age declaring themselves to be in Labour Force

25
What is the Wage Rate?
Average Weekly/Monthly Earnings of Workers in NOMINAL + REAL Terms
26
What is Labour Productivity?
Output / Labour Input | Real Output per unit of Labour per period of time
27
What policies can be used to Restore Equilibrium in the Labour Market?
Keynesian Demand policies
28
How do Keynesian Demand policies restore Equilibrium in the Labour Market?
Increase Demand for G+S--> Increase Demand for Labour- Derived Demand If Wages adjust- Demand Management not necessary to prevent Unemployment Many Policies that Increase Demand--> May Reduce NRU
29
What Supply-side Policies can be used?
Tax Cuts/Credits- e.g. Reduced Income Tax- Encourages Work Trade Union Reform- End 'Closed Shop' Unions- Encourages Wages to adjust Benefit Reforms- Increase Willingness to Work Training + Retraining Improve Efficiency of Labour Market--> Reduce Unemployment
30
How is Labour Productivity measured?
GDP/capita (per hour) | Output/Input
31
Why is Labour Productivity important?
Shows Efficiency of the Economy | Can be used to compare between different countries
32
What are the 2 main current challenges to the UK?
Sluggish growth in Productivity- stagnant | BREXIT- emigration of skilled labour
33
Define Minimum Wage
Lowest Wage that may legally be paid for an hours work- subject to Gov. restrictions
34
What is the main justification for having a Minimum Wage?
Ensures a Living Wage- wage sufficient to keep a family out of poverty
35
Why is Supply of Labour upwards sloping?
At higher wages, more people are willing to work
36
Why is Demand for Labour downwards sloping?
Employers are willing to hire more labour at lower wages
37
What happens if the M.W implemented is below the Equilibrium wage?
Companies would pay Eq. Wage, not M.W Other companies would pay Eq. Wage- they would attract the workers Marginal Revenue is still Positive
38
What happens if the M.W implemented is above the Equilibrium wage?
More workers would be willing to work at the higher wage Employers less willing to hire at the higher Wage Excess Supply of Labour- Increased Unemployment
39
What happens to Eq. Wage + Labour with a M.W above the Eq. Wage
Wage Increases- W* --> Wmin | Labour Decreases- L* --> Lmin
40
How can the Money Gained from Wage rise be > Money lost from Unemployment?
If Demand for Labour is Inelastic
41
What is the main Issue with M.W
UNEMPLOYMENT- Increase in number of people Willing to work--> Excess Supply Current Workers want to work more hours Increased CoPs- Employers hire at Lmin, not L*
42
Who are the Winners + Losers of a M.W
Winners- Workers who benefit from the wage Increase + can still work as much as they want Losers- Unemployed Workers- L*-Lmin
43
What is an argument against M.W
Gain for Workers < Loss to Employers | DWL- Net loss to Society
44
What are arguments in Favour of M.W
Increased Wage--> Increased Work Effort- Decrease Neg. Impact of Traditional analysis If Demand for Labour is Inelastic- Small Neg. Impact of M.W
45
What does the success of a M.W rely on?
Incomes of Poor families are Increased | There is Little/No Public/Social Cost
46
2 Key Elements of Analysing M.W
Employment Effect- who benefits from increased earnings | Business Response- who pays for increased earnings
47
What is the Employment Effect
Increase Income for Low-earners- help support families + children-- FOR M.W Low-wage workers become Unemployed + Decreases Income-- AGAINST M.W TRADE-OFF- Some low-wage workers WIN, some LOSE
48
What is the Business Response
Increased CoPs--> Lower Profits- Firm Pays - -> Layoff Workers to maintain Profit Margin--> Increased Unemployment or Reduced Job Benefits- Worker Pays - -> Increased Prices- Consumer Pays

Economics (20 decks)

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