Labour Market Outcomes

Question 1

Name all the labour market outcomes

Answer 1

• Wage outcomes

Question 2

Name all the ways of measuring wage outcomes (x7)

Answer 2

• Average weekly earnings
• Differences in wage outcomes
• Wage differentials between different occupations
• Wage differentials in the same occupation
• Age
• Gender
• Migrant and cultural background

Question 3

What is the nominal wage?

Answer 3

The pay received by employees in dollar terms for their contribution to the production process, not adjusted for inflation

Question 4

What is the real wage?

Answer 4

A measure of the actual purchasing power of money wages i.e. nominal wages adjusted for the effects of inflation

Question 5

Explain what happens if the growth in real wages is higher than productivity

Answer 5

If the growth in real wages is higher than productivity growth, real labour costs will rise and real wages will decrease

Question 6

Explain what happens if the growth in real wages is below the sum of inflation

Answer 6

When wage growth is below the sum of inflation and productivity growth, real labour costs will fall and profits will expand

Question 7

What do employers do in response to rising labour costs?

Answer 7

In order to protect profit levels, employers may choose to employ less labour and use more technology in production, leading to a higher rate of unemployment

Question 8

What happens when inflation is rising faster than nominal wages?

Answer 8

Real wages decrease

Question 9

What happens when nominal wages are rising faster than inflation?

Answer 9

Real wages increase

Question 10

How does geographical mobility influence wage rates?

Answer 10

Employers find it difficult to attract labour to isolated locations and generally have to pay higher wages to do so

Question 11

How does geographical mobility influence wage rates?

Answer 11

Employers find it difficult to attract labour to isolated locations and generally have to pay for higher wages to do so

Question 12

What are the factors that influence wage rates in the same occupation? (x3)

Answer 12

• Geographic mobility
• The productivity of labour
• The capacity of the firm to pay

Question 13

What is labour productivity?

Answer 13

The quantity of output produced in a production process per unit of labour per unit of time

Question 14

How does the capacity of a firm to pay influence wage rates in the same occupation?

Answer 14

As some firms are more profitable and have a greater capacity to pay higher wages e.g. firms with market power and therefore are able to set prices and earn higher profits would be able to pay higher wages compared to firms that face greater competition in their product markets

Question 15

How does the capacity of a firm to pay influence wage rates in the same occupation?

Answer 15

As some firms are more profitable and have a greater capacity to pay higher wages e.g. firms with market power and therefore ability to set prices and earn higher profits would be able to pay higher wages compared to firms that face greater competition in their product markets

Question 16

What is enterprise bargaining?

Answer 16

Negotiations between employers or employees about pay and work conditions at the level of the individual firm

Question 17

Name the economic benefits of inequality (x5)

Answer 17

• Encourages the labour force to increase education and skill levels
• Encourages the labour force to work longer and harder
• Makes the labour force more mobile
• Encourages entrepreneurs to accept risks more readily
• Creates the potential for higher savings and capital formation

Question 18

Name the economic costs of inequality (x6)

Answer 18

• Reduced utility
• Possible reduced economic growth
• Reduced consumption and investment
• Conspicuous consumption
• Poverty and social problems
• Increased cost of welfare support

Question 19

Why does inequality of opportunity exist in Australia?

Answer 19

• Existing inequality in the distribution of income and wealth tends to perpetuate inequality of opportunity
• Not everyone has the same mental and physical attributes as and the same potential with regard to the acquisition of income and wealth
• People who acquire wealth through inheritance have a much greater opportunity to build up wealth through investments as opposed to those who start with no wealth
• People may not have access to the same networks of people that may lead to new opportunities

Question 20

What are the social costs of inequality?

Answer 20

• Wellbeing - social problems such as lower life expectancy, mental illness, crime, lower life expectancy are more related to a country’s level of inequality than changes in the level of national income
• Social class divisions - differences in income and wealth contribute to divisions within societies between lower and higher income groups
• Poverty - inequality results from high levels of poverty. Many Australians live in relative poverty where poverty traps families in a vicious cycle of low incomes and limited economic opportunities

Question 21

What is the formula for the unemployment rate?

Answer 21

Number of persons employed/Total labour force x 100

Question 22

Name all the types of unemployment (x8)

Answer 22

• Cyclical
• Structural
• Long term
• Seasonal
• Frictional
• Hardcore
• Hidden
• Underemployment