Labour Market- Theme 3 Flashcards
What factors influence the demand for labour?
- as demand for firms output increases then demand for labour to produce this output also increases.
- as productivity of workers increases, so does demand for labour
- cost and availability of substitutes. If capital more expensive, firms will demand more labour.
Describe demand for labour as a derived demand.
Labour is a derived demand. This means that the demand for labour comes from the demand for what it produces.
What factors influence the supply of labour to a particular occupation?
- migration, particularly affects supply of labour at lower wage rates, migrants usually from economies with lower average wages than UK minimum wage.
- training, If lot of training or high qualifications required for job, then supply of labour may fall. However, if government subsidise training, easier for workers to gain skills for job, so supply of labour could increase.
- Demographics of the population, more people who are able and willing to work,higher the supply of labour.
Describe geographical immobility of labour.
Occurs when people can’t relocate to another part of the country to take up job opportunities.
Describe occupational immobility of labour.
When orders are unable to change jobs or take up new opportunities due to lack of skills or training.
Describe labour market equilibrium
The labour market is a factor market. supply of labour determined by those who want to be employed (the employees), whilst demand for labour is from employers.
Labour market equilibrium determined where supply of labour and demand for labour meet. This determines the equilibrium price of labour, i.e. the wage rate.
What are some current labour market issues.
- wage differentials
- impact of migration
- unemployment
Explain why formal education creates wage differentials.
On average, those with a degree earn more over their lifetime than those who gain just A levels.
Explain why skills,qualifications and training creates wage differentials.
- Jobs which require more training and education offer higher wages. Training workers is expensive for firms, so they compensate for this by offering workers, who have already undergone education and training, higher wages.
- Skilled workers produce higher outputs than unskilled workers because they are more productive, so the demand for their labour is higher. This means they can demand higher wages.
Explain why pay gaps create wage differentials.
The wage gap between skilled and unskilled workers has increased in the UK recently. This is due to technological change and globalisation, which has shifted production abroad.
Explain why gender creates wage differentials.
Even with equal pay laws, women still earn less than men on average. could be due to career breaks and fewer hours worked on average than men, or because women are crowded into low-paid or part- time jobs, which may only require low skill levels. Women could also be discriminated against when it comes to promotions, which effectively locks out higher paying jobs. Although a gap still exists, it is narrowing.
Explain the impact of migration on labour markets.
- There could be more competition to get a job due to the rise in the size of the working population. Migrants tend to be of working age, and many are looking for a job.
- Migrants tend to bring high quality skills to domestic workforce, which can increase productivity and increase skillset of labour market. This could increase global competitiveness
- The skills of migrant labour could substitute those of the domestic market, so workers could be replaced. If the skills complement the domestic labour market, there could be a welfare gain through higher productivities
Explain unemployment as a current labour issue.
Unemployment is a problem since, if consumers are unemployed, they have less disposable income and their standard of living may fall as a result. There are also psychological consequences of losing a job, which could affect the mental health of workers.
Explain minimum wage as a form of government intervention in the labour market.
The national minimum wage is an example of a minimum price. Minimum wage has to be set above the free market price.
-It could make it harder for young people to find a job, because their lack of experience might not be valuable to firms who are paying more for their labour. The government might make more tax revenue, due to more people earning higher wages.
A higher wage could make the country less competitive on a global scale, since they cannot compete with countries that have lower wages.
Explain maximum wage as a form of government intervention in the labour market.
- A maximum wage is also known as a wage ceiling, and it limits how much income someone can earn. It can be used as a means to redistribute wealth more equitably in society.
- In theory, a maximum wage should limit inflation, since wages (and therefore consumer demand) is limited. Maximum wages must be set below the free market equilibrium wage to be effective.
- One criticism of a maximum wage is that it could be a disincentive to innovate, and workers might opt for less demanding work.
