Labour Markets Flashcards
What is Derived Demand
Derived demand is demand for a factor of production (like labour) that is derived from the demand of another good/service.
E.g. Demand for builders is derived from demand for houses
What is Productivity
Higher productivity → firms demand more workers because they’re more productive → can increase output and profit.
However → firms might demand fewer workers because now they don’t need as many workers to produce all output.
What are Capital Costs
Capital and labour are substitutes.
Cost of capital decreases → cheaper to buy capital → firms will decrease demand for labour
E.g. As capital costs have decreased over the years, supermarkets have invested in Self-Service checkouts and reduced demand for till workers.
What are the effects of Migration
Workers migrate out of a country → country’s labour supply falls
Workers migrate into a country → country’s labour supply increases
What are the effects benefits
Decreasing benefits → forces people into work → increases labour supply
Increasing benefits → people to quit their jobs to get benefits/stay unemployed → decreases labour supply
Income Tax (increase)
A higher income tax reduces the income workers keep, reducing incentive to work, decreasing supply.
But some workers need to earn a certain amount of income (e.g. to cover their mortgages for instance), so a higher tax means they’ll have to work more (to earn the same income after the tax change), increasing supply!
Income Tax (decrease)
A lower income tax increases the income workers keep, increasing incentive to work, increasing supply.
But some workers just need to earn a certain amount of income (to cover their mortgages), so a lower tax means they’ll be able to work less (to earn the same income after the tax change), decreasing supply!
What are Non-Pecuniary Benefits
Non-pecuniary benefits are benefits of a job other than the wage received.
Like a company car or job satisfaction!
If non-pecuniary benefits are higher, the job becomes more appealing so supply will shift out to the right.
While if non-pecuniary benefits are lower, the job becomes less appealing so supply will shift in, to the left.
Education & Training (supply increase)
More training/education → more supply of skilled labour
Education & Training (changes in demand)
Demand for coders might increase because the new coding courses will increase the productivity of coders. This mean coders will be able to produce more software and make firms more profit. So firms will demand more coders.
However, if coders become more productive and each coder can produce more software, firms might actually reduce demand for coders because they now need fewer coders to produce the software they need!
