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Econ theme 3 micro > Labour markets > Flashcards

Labour markets Flashcards

1
Q

labour market

A

factor market, refers to supply and demand for labour (workers)
provide supply - employees
provide demand - employers

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2
Q

what is labour

A

a derived demand, demand for labour comes from. the demand fro wha it produces

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3
Q

what causes movements along supply and demand curves for labour

A

wage rate

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4
Q

what is on y axis and x axis for demand and supply diagram of labour

A

x axis - number of employees
y axis - wage rate

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5
Q

demand for labour and products relationship

A

derived demand:
higher demand for products, higher demand for labour and vice versa

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6
Q

relationship between demand and productivity of labour

A

higher productivity of labour; higher demand of labour

  • can be increased by better education+ training and using technology
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7
Q

affect of substitutes on demand for labour

A

fall in demand - as you can find cheaper capital

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8
Q

how does profitability affect amount of labour

A

higher productivity; more labour can be afforded to employ

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9
Q

effect of number of firms on market on demand for labour

A

fewer firms; fewer buyers of labour; less demand

leads to lower wages

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10
Q

define supply of labour/calculation

A

number of workers willing and able to work at the current wage rate multiplied by the number of hours thy can work

supply of labour = no. of workers at wage rate x no. hours they work

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11
Q

factors affecting supply of labour

A
  1. wage rate
  2. Population (how many willing and able to work)
  3. Migration
  4. Added e edit to work (holidays, preference to work, promotions, low cost of working to afford childcare)
  5. Leisure time
  6. Trade unions (they will know worker rights will be protected)
  7. Training, education, skill requirements
  8. Taxes + benefits (high taxes, high benefits)
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12
Q

2 types of market failure in labour markets

A
  1. Geographical immobility - refers to things stoping FoP moving e.g due to family, social ties, financial costs of moving, imperfect market knowledge on work, regional variations on house prices
  2. Occupational mobility - refers to things preventing FoP changing their use e.g labour find it difficult to change occupation, no transferable skills, insufficient education + training
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13
Q

Labour market equilibrium

A

where supply of labour and demand of labour meet

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14
Q

sticky wages

A

economic concept that Keynes stated describing how wages adjust slowly to changes in labour market conditions, as wages rates aren’t that flexible

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15
Q

wage differentials meaning

A

when workers can be paid different amounts even in the same job

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16
Q

reasons for wage differentials

A
  • formal education (degree employees will earn more than someone who graduated out of A levels)
  • Skills, qualifications and training (due to difficulty of job)
  • Pay gaps (unskilled vs. skilled)
  • Gender
  • Discrimination (disability, race, age)
  • Wages + skills - productivity and output of different skill level (can demand higher wages)
17
Q

impact of immigration on labour markets

A
  • more competition
  • migrants bring high quality skills (increases productivity)
  • lower wages
  • skills of migrant workers could replace those in domestic market
18
Q

why is unemployment a problem

A

consumers unemployed; less disposable income; standard of living falls; could have psychological affects - ruins mental health, lower welfare

19
Q

hysteresis

A

type of structural unemployment

someone works for a long time and their skills deteriorate

20
Q

where is minimum wage set on graph

A

set above equilibrium, above free market price

21
Q

where is maximum wage set on graph

A

below equilibrium, below free market price

22
Q

impacts of rise in national minimum wage

A
  • no evidence of rise in unemployment (NMW is relatively low)
  • yields positive externalities - increase standards of living, provide incentive for people to work
  • less competitive on a global scale - cannot compete with countries with lower wages
  • government will increase their tax revenue - due to higher wages; higher proportion
  • harder for young people to find job as firms paying for more for labour; the skills they provide aren’t valuable
23
Q

impacts of maximum wage

A
  • limits how much income one can earn, used to redistribute wealth equally
  • should limit inflation (as wages limited)
  • disincentive to innovate, workers opt for less demanding work
  • lead to more equal distribution of wealth in society
  • controls market wage but could lead to gov. failure if they misjudge where optimum wage should be
24
Q

how much government spending goes towards public sector pay

A

half of government spending

25
Q

public sector or private sector pay more equal

A

public sector

26
Q

what is the flexibility of the labour market

A

how willing and able labour is able to respond to changes in the market conditions

27
Q

policies to tackle labour market immobility

A
  • trade union power - negotiate higher wages, increase job security
  • regulation - reduce regulation, increase freedoms to hire and fire
  • welfare payments and income tax rates - generous welfare payments, income tax rates high - less flexibility
  • training - more skilled workforce; more flexible labour market
  • infrastructure - improvements helps with geographical immobility, easier to move around
  • housing - more affordable; easier to move
28
Q

what does it mean if the labour demand inelastic what does it mean

A

few or no substitutes

29
Q

elasticity of demand for labour

A

how responsive demand for labour is when the market wage rate changes

30
Q

factors affecting elasticity of demand for labour

A
  • cost of labour as a proportion of total costs (greater proportion; more elastic)
  • availability and ease to use substitute factors
  • PED of product (more elastic product; more elastic demand for labour)
31
Q

elasticity of supply of labour

A

responsiveness to the change in quantity of labour supplied to a change in wage rate

32
Q

factors affecting elasticity of labour

A
  • skills of the workforce
  • length of training needed for a job
  • time period (short run - inelastic, long run - elastic)
  • sense of vocation (some jobs have rewards that aren’t financial; inelastic)

Econ theme 3 micro (2 decks)

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