Labour markets Flashcards
Shifting the supply curve
size of labour force- immigration training and education barriers to entry- qualifications, experience needed pay in other occupations non-monetary rewards of the job
shifting the demand curve
cost of substitutes eg capital
demand for the firms product
profitability of the firm/ industry
Monospony
Single employer
wage setting power
wages typically lower, employment lower
MC in monopsony
MC is higher than average cost- supply
as to employ more workers firms must raise wages
Trade unions FOR
able to overcome unfair wages in monopsony/ push wages up generally
wage efficiency theory
represent workers and advocate for their fair treatment and suitable working conditions
Trade unions AGAINST
Higher cost of labour-
reduced supernormal profits, less reinvestment and dynamic efficeny
may lead to higher prices- loss of consumer welfare
UNEMPLOYMENT
produce cost push inflation- wage price spiral (1970s inflation reached 25% when trade unions v powerful)
interferes with market mechanism- low wages should be a sign of low demand for labour- incentive to leave market gain skills needed to join others and achieve higher wage
impact on macro-economy- higher prices- loss of international competitiveness- impact on (X-M), discourage FDI, see firms relocate/ outsource to where trade unions less powerful
Are trade unions still significantly powerful?
No
post-thatcher trade unions have lost significant rights and lack power to be efficacy able to take industrial action and limt supply
membership has reduced significantly since 1970s
Recent trade union action (RMT)
RMT
London tube strike March 2022
striking over job cuts and staff pensions
caused wide spread disruption on underground, were successful
Trade union evaluation
Are trade unions still powerful post-thatcher? membership decline
outcomes for employment/ unemployment are dependant on WED
more elastic- the worse the outcomes for unemployment
WES- more elastic the better the outcomes for increased employment in a monopsony
efficiency wage theory
are the increased costs of higher wages/ better conditions offset or override by the positive effects on labour productivity as a result?
vary industry by industry- how labour intensive an industry is
The effect of the threat of trade unions
even though trade unions are not powerful anymore, have little influence over wages
just the threat of them and their industrial action
Why a higher wage means a higher supply of labour
Higher wage= higher reward
increased opportunity cost of leisure
Factors affecting the WED
Time
PED of final product
proportion on TC labour makes up
ability to substitute capital for labour
Factors affecting WES
Time
skill level/ job requirements
vocational aspects (link to wage fall in teaching)
level of unemployment (labour pool available to work)
Does the NMW help to increase living standards?
poorest members of society are unemployed- will do nothing to help them
large proportion employed in gig-economy suffer from underemployment
may not reduce inequalities if higher paid individuals bargain for higher wages too to maintain differential
Why is labour market discrimination bad?
not employing workers based off TRUE MRP means not paid the value the add
welfare loss
as MRP does not equal profit maximising output
if employed more more value could be derived
biases could cloud decision making and percent employers from choosing the best candidate for the job
