Labour Markets

Question 1

labour markets definition

Answer 1

The labour market includes the supply of labour by households and the demand for labour by firms

Question 2

factors effecting the demand for labour (6)

Answer 2

Wage rates

demand for the product

prices of other factors of production

wages in other countries

technology

regulation

Question 3

how do wage rates influence the demand for labour

Answer 3

Wage is the price of labour – as wage rates increase demand for labour contracts – since MRP of labour must be higher for it to be worthwhile employing more people – therefore less are employed

Question 4

how does the demand for the product influence the demand for labour

Answer 4

Labour is a derived demand – no demand for product then no demand for labour – won’t employ if their good aren’t making profits – links to concept of MRP – an increase in output or price of a good will increase demand for the labour that produces that good

Question 5

how do the prices of other factors of production influence the demand for labour

Answer 5

if machinery and equipment becomes cheap – people will switch machinery for labour – demand for labour falls

Question 6

how do Wages in other countries influence the demand for labour

Answer 6

if wages are lower in other countries and relatively high in UK – people will be employed in other countries as it represents lower cost for business

Question 7

how does technology influence the demand for labour

Answer 7

improvement in computers and tech – jobs are lost as work is being done by machines – less demand for labour – but demand for labour in tech industries is increasing – “by 2040, about 47% of jobs could be lost to technology”

Question 8

how does regulation influence the demand for labour

Answer 8

as rules are set jobs disappear – while other jobs are created – regulation in labour market will discourage firms from hiring – as it is costly and time consuming – lowering demand for labour

Question 9

what are the factors affecting the PED of labour (4)

Answer 9

• Directly correlated to the price elasticity of demand for the product
• Proportion of wages to the total cost of production
• Substitutes
• Time

Question 10

how does the Direct correlation to the price elasticity of demand for the product affect the PED of labour

Answer 10

if a good is elastic then a rise In wages will have a large impact on the quantity the business sells – therefore businesses will reduce the number of people it employs – to make profits

Question 11

how does the Proportion of wages to the total cost of production affect the PED of labour

Answer 11

if wages are a large proportion of costs – an increase in wages will increase costs massively – large fall in demand for labour – it will be elastic

Question 12

substitutes affecting the PED of labour

Answer 12

such as machinery and labour in other countries – demand will be elastic – means high skilled jobs tend to be more inelastic than low skilled jobs – as labour cannot be easily replaced

Question 13

Time affect on PED of labour

Answer 13

in the long run is more elastic as machinery can be developed and jobs can be moved – however in short run – firms have to employ workers – redundancy payments can be expensive

Question 14

factors effecting the supply of labour (4)

Answer 14

Wages

population and distribution of age

non monetary benefits

trade unions

Question 15

how do wages affect the supply of labour

Answer 15

supply of labour curve for an individual is backward bending curve – increase in wages leads to an increase in hours worked at first – however beyond a certain point – leads to a decrease in hours worked – however for particular occupation upward sloping curve – can increase number of hours worked in two ways – increase labour force or using existing labour force – therefore although an increase in wages may not increase hours worked – it will increase number of workers – switch from other industries or from being unemployed

Question 16

how does the population and distribution of age influence the supply of labour

Answer 16

high population means large supply of labour – age important as they need to be of working age – migration plays a role in determining the workforce – as most migrants are of working age and come to work

Question 17

how do non monetary benefits influence the supply of labour

Answer 17

high job satisfaction – supply of labour increases – may be associated with area e.g. London – also firms may offer perks such as private healthcare – increases supply of labour

Question 18

how trade unions influence the supply of Labour

Answer 18

restrict supply of labour by introducing barriers to entry – e.g. degree needed for teaching

Question 19

what is occupational immobility

Answer 19

workers find it difficult to move from one job to another due to lack of transferable skills – particularly difficult in the short term as workers may need training – but in long run may only be possible with a high cost

Question 20

what is geographical immobility

Answer 20

difficult to move from one place to another due to cost of movement, family etc – may be no jobs in Edinburgh but jobs in London – someone from Edinburgh may not be aware of vacancies in London – they will struggle – may not be able to afford housing in new area – difficult for young people as they may not be able to afford moving out of parents home – in general affects those lower income more

Question 21

effect of the UK skill shortage

Answer 21

could cost £90 billion a year following Brexit – 4 million to few high skilled – however 6 million too many low skilled – engineering suffering from skill shortages

Question 22

what is the elasticity of supply

Answer 22

• Responsiveness of supply to a change in wage rates

Question 23

factors effecting the elasticity of supply (3)

Answer 23

level of qualifications and training

Availability of suitable labour in other industries

Time

Question 24

how do the level of qualifications and training effect the elasticity of supply

Answer 24

since if there is a high level of qualifications needed for job – people will not easily be able to take up the job – therefore supply of labour will be inelastic

Question 25

how does the Availability of suitable labour in other industries affect the elasticity of supply

Answer 25

companies can poach workers from other industries – will be more elastic

Question 26

how does time effect the elasticity of supply

Answer 26

in long run supply of labour is more elastic as people have time to train – however if the job is vocational it will be inelastic – since even if wages fall people won’t leave their job

Question 27

labour market issues (3)

Answer 27

Skills shortages

retirement

wage inequality

Question 28

how do skill shortages cause labour market issues

Answer 28

Uk suffers from gographical and occupational immobility – e.g even if there are enough engineers – there aren’t enough in certain areas

Question 29

how does retirement cause labour market issues

Answer 29

rising life expectancy – means an increase of people reaching retirement age – baby boomers reach retirement – negative effect on Gov budget – pensioners makeup over 50% of welfare spending – retirement age continues to rise – gov encourage people to save their own pensions

Question 30

how does wage inequality cause labour market issues

Answer 30

those on the highest wages seen their wages grow by a bigger percentage than those on lowest wages – questions of relative poverty and the level of redistribution required