Markets In Action: Labour Market Flashcards
Relationship between demand for labour and the wage rate
Inverse
When does the demand curve for labour shift
E.g.
- rise in level of consumer demand
- increase in the productivity of labour (employees chose labour over capital)
- government subsidy for labour
When would the labour demand curve shift inwards
- recession
- falling profits
How is labour a derived demand
The demand for labour depends on the demand for the products they produce
What does the elasticity of labour measure
The responsiveness of demand for labour when there is a change in the ruling market wage rate
What is the labour supply
The number of hours people are willing and able to supply at a given wage rate
Key factors affecting labour supply
- wage rate
- overtime
- substitute occupations
- barriers to entry
- improvements in the occupational mobility of labour
- non-monetary characteristics to specific goods
- net migration of labour
Where are employees hired up to on the labour market diagram
Employees are hired up to the point where the extra cost of hiring an employee is equal to the extra sales revenue from selling their output.
Elasticity of supply in lower-skilled jobs
Elastic- a pool of labour is available at a fairly constant market wage rate
Elasticity of supply in higher skilled and training jobs
The labour supply will be more inelastic
Reasons for wage and salary differentials
- risk taking
- qualifications / skills
- productivity + revenue creation
- trade unions and their power
- discrimination
