Labour Markets Flashcards
What is the labour market?
Where workers sell their labour and employers buy the labour-it consists of households’supply of labour and firms’ demand for labour
What do wages do?How are they determined?
- Wages provide an income to households but represent a cost to firms
- the interaction between supply and demand for labour gives wages-in a free competitive market economy its solely based on it HOWEVER in most economies both GOVERNMENTS AND TRADE UNIONS exert Influence on it
What is a trade union?
A trade union is an organisation of workers that is active on behalf of its members eg.increasing wages,salaries and working conditions
What is the role of the Labour market?
To enable workers who are willing and able to sell their labour meet employers willing and able to -offer them a job-and determine the wage rate
IN THEORY EMPLOYERS SIGNAL TO INDIVIDUALS WHICH JOBS ARE IN SHORT SUPPLY AND HAVE HIGHER PAY ATTRACTING MORE PEOPLE TO THE AREA
What is the difference between salary and pay?
Salary is a yearly wage equally divided into 12 monthly parts
Pay can be used in place of salary and wages-it stands for the amount a worker earns
What are the different types of labour markets?
Local-within a short commuting distance of the workers home
National-covers the whole of the UK
International-covering whole wor.d
Labour markets consists of smaller markets for different….
- qualifications1some have specific requirements
- skills-others may have specific skills additional to qualifications
- geographical locations
Labour markets also depend on information exchange about:
- wage rates
- conditions of employment
- level of competition
- location etc
Why can’t workers always move between jobs‽
- lack skills required eg train driver can’t be engineer
- unable or unwilling to relocate to diff part of differences country eg.due to language
- personal factors eg.family ties that restrict certain jobs,locations
- lack of info available-due to information failure
Overall the labour market acts as a -_______ market in times of low unemployment than during periods of fall in gdp (when economy is doing badly)
Overall the labour market acts as a free market in times of low unemployment than during periods of fall in gdp (when economy is doing badly)
What is meant by interaction of workers and employers?
- interactions take place in a variety of different ways
- in many jobs individual workers interact directly with their workers to establish wages and working conditions eg.if workers want a pay rise ,they discuss it with their employers .
What is meant by collective bargaining?
Collective bargaining is when trade unions negotiate with employers on behalf of its members to set wage rate and working conditions. Eg.if they want a pay rise they discuss it with their employer
In this case wage rate applies to whole occupation
What is equilibrium wage?
Where supply=demand
What is equilibrium wage?
Where supply=demand
What are the factors affecting demand for labour
Demand for product that labour help produce-this is DERIVED DEMAND -If consumers want more of a good or a service more firms will want the workers who make the product demand, therefore increases
- the state of the economy if the economy is growing more labour is likely to be demanded as existing firms are expanding Aren’t more new firms are joining
- Wage rates the downward slope of the demand curve shows that there is an inverse relationship between demand for labour and the wage rate
- Real wages fall in real wages rates may persuade employers to employ more people or use more labour instead of capital
- productivity of labour if the productivity of labour rises labour becomes cheaper than capital leading to more people being employed
- profitability of firms, firms that are making large posits are likely to expand and therefore employ more labour
What is the supply of labour
The supply of labour is usually thought of as those willing and able to supply their labour including the unemployed
(However the is a potential additional supply of people who are currently in active for one reason or anotheR)
What A the factors affecting demand for labour ?
- The state of the economy -if growing there’s more demand for labour
- Increased demand -if particular markets are growing fast
- Wage rates-downward slope of the demand curve shows there is an inverse relationship beween demand and wage rate
- Real wages fall in this encourage employers to employ more people or to use labour than capital
- Productivity of labour-labour becomes cheaper if productivity rises
- Profitability of firms -those making large profits likely to hire more
What A the factors affecting demand for labour ?
- The state of the economy -if growing there’s more demand for labour
- Increased demand -if particular markets are growing fast
- Wage rates-downward slope of the demand curve shows there is an inverse relationship beween demand and wage rate
- Real wages fall in this encourage employers to employ more people or to use labour than capital
- Productivity of labour-labour becomes cheaper if productivity rises
- Profitability of firms -those making large profits likely to hire more
What are factors affecting supply for labour?
- Wage rate: the higher the wages on offer, the more labour is likely to be supplied.
- Other money payments: if there are opportunities to boost earnings through overtime payments or productivity-related pay schemes etc., this is likely to increase the supply.
● Size of the working population: this is affected by retirement and school leaving ages, migration, and numbers going to further education/university. The gradual rise of the retirement age will mean that there are more people available to work. In addition, the majority of migrants who enter the UK are of working age.
• Non-monetary factors: these include working conditions, opportunities for promotion, job security etc.
Barriers to entry: these may consist of necessary qualifications as in the cases of doctors, lawyers and veterinarians, where the nature of the qualifications needed to work and the length of time of training restrict the supply. They may also take the form of trade unions and agreements with employers, and discrimination, the lowering of which has seen more females enter the workforce.
• Education and training: this will increase the number of skilled workers available.
How do we analyse determination of wages through supply and demand?
https://docs.google.com/document/d/1VksEAYKFACoieie6YIX59cK0k1qGw6rPctL7bKz80k8/edit?usp=drivesdk
What is gross pay?
How do u calculate it?
The amount of money an employee earns before any deductions are made
(This includes overtime payments,bonuses, allowances etc and this is what is quoted in job adverts)
Basepay+any extra payments=gross pay
What is net pay?
How do you calculate it?
The amount of money an employee is left with after deductions are made from the gross income
(this is what they can spend or save afterwarda)
Netpay=gross pay-deductions
What do deductions include?
I
N
P
- income tax-tax levied on personal income
- national insurance-A contribution paid by workers and their employers towards cost of state benefits
- pension contributions -money that a worker pays into a workplace pension scheme to which ,the employer also contributes
What’s a pension?
A fixed amount paid at regular intervals to a person(usually retired)or their surviving dependants
