Micro 48 - 51 Flashcards
What 4 features does a fully flexible labour market have?
- Change the number if workers quickly.
- Change the number of hours people work.
- Change the tasts of workers.
- Change peoples wages without much notice or barriers.
What is geographic immobility and why does it cause labour market failure?
When workers cant move between regions/cities/countries. This creates long term unemployment and leads to disparities in wages across places.
What is occupational immobility and why does it cause labour market failure?
When workers can’t change jobs due to lack of skills and qualificaitons. Causes structural unemployment.
How can technology reduce market failure associated with unemployment?
- Lowers barriers - lots of information and applying online.
- Work from home - tackles geographical immobility.
- Creates jobs - streaming/dropshipping.
*Improves productivity.;
Define disequilibrium unemployment?
When aggregate supply of labour exceeds the aggregate demand for labour.
What is the best ways to show disequlibrium unemployment (cyclical unemployment basically)
AD shifting left on AD/AS diagram.
Minimum wage diagram.
What is the obvious solution to the disequillibrium unemployment?
Drop wages.
Why is reducing wages not possible?
People are not willing to take the wage cut - sticky wages
What 6 factors suggest the UKs labour market is becoming more flexible?
- Rise in zero hour contracts.
- Migration and globalisation - larger supply of labour.
- Harder to get benefits now than before.
- Brexit - lower employee protection after brexit.
- Trade union power is falling - banned closed shops.
- Remote working.
What are 3 advantages of flexible labour markets?
- Helps people with kids.
- Helps firms reduce costs - no contracts.
- Govt - lower unemployment and less benefits.
What are 3 disadvantgaes of flecxible labour markets?
- More ineuqality.
- Less employee rights.
- Wages fall.
What are 6 policies to improve labour market flexibility and mobility?
- Reduce minimum wage.
- Invest in infrastructure.
- Reduce visa restrictions.
- Invest in education and training.
- Cut benefits.
- Increase zero hour contacts
Define emigration?
Workers relocate from a domestic country ti a foreign country.
Define immigration?
Workers relocate from a foreign country to the domestic country.
What is the formula for net migration?
Net migration = immigration - emigration.
(In - out)
Define informal labour market?
Economic activity that is not registered.
Why might an individual want to participate in the informal labour market?
- Higher wages.
- No taxes.
- Cant find job in formal.
Explain “reduces inequality” as an advantage of of minimum wage?
Give eval too
Increases income of the bottom 10% because they are likely to work lower paying jobs. Inequality will better assuming that the top 10% of earners dont see a chnage in income.
Eval:
- Dont know where to set the MW.
- Distrotion of price signals. Labour is paid same reagrdless of their MRP, whcih is unfair.
- During economic growth, people that benefit most are high income earners.
Explain “unemployment” as an disadvantage of of minimum wage?
GIve eval too
Contraction along the demadn curve, which leads to an excess supply of labour. This will lead to a fall in incomes for people - GDP falls.
EVAL:
Depends on the elasticity of demand for labour. Teachers have inelastic demadn and so firms will pay the higher wages.
Explain “inequlaity falls” as an advantage of a maximum wage?
Give eval too
Reduce the amount of bonuses given to bankers (now only allowed 100% of salary). The top 20% earned 60% of income. Now the top 20% earn 30%.
Eval:
- Wages of the bottom 10% have declined as wages have not been increasing in line with inflation. Prices are still higher than pre-covid levels.
- Top 5% have other sources of income.
- Does not reduce wealth inequality which ultimately brings income.
- Capital flight and brain drain- more inequlaity in the LR due to less investment.
