LS9 - Demand And Supply For Labour

Question 1

Factors that shift the demand curve for labour

Answer 1

Changes in productivity of labour - demand for labour is a derived demand, firms demand labour for the sake of the output that labour produces. Suggests that the amount of output that labour is able to produce will be an important factor

Changes in the price of a good labour produces - if price increases, firms increase production. To expand output, firms need to increase inputs to production (labour). So if price rises, demand for labour in that industry also rises

Changes in the demand of the good labour produces - demand of good labour produces increase, more workers needed in that industry so demand for labour increases

Changes in the price of capital - if capital becomes more expensive, firms will employ more labour, so demand for labour increases

Wage rate rise - contraction in demand for labour
Productivity, firm profitability - if it’s high then demand for labour increases
Tech, regulation - if it’s low then demand for labour increases

Question 2

Demand for labour

Answer 2

Quantity of labour employers wish to hire at each possible wage rate

Question 3

Supply of labour

Answer 3

Ability and willingness of people to make themselves available to work at different wage rates

Question 4

Factors influencing supply of labour

Answer 4

Wage in substitute occupations
Barriers to entry
Non-monetary job characteristics
Improvements in occupational mobility of labour
Time
Size of working pop
Value of leisure time

Question 5

Individual labour supply curve

Answer 5

Backward bending
As wage continues to rise, income effect may gradually become stronger so that at some wage level the worker will choose to supply less labour and will demand more leisure causing individual labour supply curve to be backward bending, where an increase in the wage rate induces the individual to supply fewer hours of work in order to enjoy more leisure time.

Question 6

Perfect competition efficiency

Answer 6

Productive - minimum point of long-run average cost curve. Not achieved in the short run Henry W from need not be operating at minimum average cost

Allocative - P=MC. Feature in both short and long run as firms set price equal to marginal cost even in the short run

Question 7

Geographical immobility of labour

Answer 7

Refers to when available jobs and available workers are not located in the same area
Workers will have to travel to work - creating a cost - travel, leaving friends/family, new residence,

Question 8

Occupational immobility of labour

Answer 8

Difficulty workers face in moving from one occupation to another
Creates need for retraining - people need to gain skils, exp, qualifications ot move to a different occupation
Causes structural unemployment

Question 9

Labour market issues

Answer 9

Zero-hour contracts - employees are not guaranteed work, and work only when needed by employer; unstable income, as working hours are not set
Discriminination - discrimination based upon gender, race, sexual orientation, disability - can impact potential pay or likelihood of getting hired
Education and training - employers need to pay apprenticeship levy as a form of tax to fund apprenticeships; subjects that students choose might limit potential skills needed in future
Shortages - farming, hospitality, construction, IT, healthcare industries facing shortgaes in UK - affected by Brexit, limiting immigration; low pay and poor career opportunities in these industries
Retirement - rise of life expectancy and better healthcare and no age discrimination has allowed people to keep wokring for longer - retirement age has increased