Labour Markets Flashcards
What is a labour market
A set of arrangements that allows the buyers and sellers of labour to come into contact
Consists of the demand and supply of labour
Call this a factor market because it is is a market for one of the FOP
What does the labour market determine
The price of labour or wage
Define derived demand
Demand that comes from the demand for something else
What are the determinants of demand for labour?
Productivity of the workforce
Derived demand for labour
Government employment subsidy
A change in the cost of capital equipment
Who demands labour
Firms
Who supplies labour
Households
What affects demand for a product
Substitutes Weather Trends Price Income
What is the relationship between capital and labour
Capital is slowly replacing labour
Define elasticity of demand for labour
The responsiveness of the quantity demanded of labour to changes in the wage rate ( the price of labour )
How to calculate elasticity of demand for labour
% change in Qd
________________
% change in wages
What is the result of the elasticity of labour
Result is always negative because the wage rate and Qd have a negative relationship
What are the determinants of elasticity of demand for labour
Time
The elasticity of demand for the product
The proportion of labour cost to total cost
The availability of substitutes
What are the determinants of supply for labour
Changes in population size Changes to immigration policy Changes in social attitudes Changes in WR in other markets Changes to the tax and benefits system Changes to training and education Changes to school leaning and retirement age Social and cultural changes such as attitudes to women working Changes in power of trade unions
Define the elasticity of spilt for labour
The responsiveness of the quantity supplied of labour to changes in the wage rate ( the price of labour )
How to calculate elasticity of supply for labour
% change in Qs
________________
% change in wages
Determinants of elasticity of supply for labour
Time
Mobility of labour
Define wage differentials
The Duffy in wages between workers with different skills in the same industry or between those with comparable skills in different industries or localities
What are the causes of wage differentials
Compensating wage differentials Skills/qualifications Discrimination Profitability of different industries Inherited privilege Trade unions Labour immobility
Define minimum wages
A wage rate below which employers will not pay
What are the 2 types of minimum wage
A legal or statutory MW - imposed by the government
A trade union imposed MW ( unions will threaten strikes or other industrial action )
What are the advantages of a minimum wage
Improves equity
Labour market incentives
Reduces labour market discrimination
Reduces relative poverty
What are the disadvantages of having a minimum wage
Creates unemployment
Reduces international competitiveness
May deter FDI ( foreign direct investment )
Effect on relative poverty is questionable
