Micro part 18- Issues in the labour market

Question 1

What is the national living wage

Answer 1

1. An hourly wage worked out by the Living Wage
2. Foundation, not compulsory but encouraged by the government
3. It covers the basic cost of living depending on region (one for London and one for rest of UK)
4. Advantages/disadvantages similar to that of minimum wage

Question 2

What is Labour market flexibility

Answer 2

1. the extent to which demand and supply in a labour can respond to external changes and return to a new market equilibrium
2. More flexibility is good as associated with lower unemployment and higher participation rate.
3. This is because workers can transfer between activities quickly

Question 3

What is geographical flexibility

Answer 3

1. willingness of workers to move to another area to get a job.
2. This can reduce difference in regional unemployment.

Question 4

How can geographical flexibility be increased

Answer 4

1. it can be increased by improving information available to workers to identify jobs they may be suitable
2. e.g. a worker in one place in the country may be unemployed and a firm in another region needs labour that matches the skillset of the unemployed workers.
3. There is excess supply in the region where the worker is unemployed but excess demand in the other.
4. can be increased by reducing housing costs in areas of excess demand for labour since high housing can act as a barrier to entry

Question 5

What is occupational flexibility and how can it be increased

Answer 5

1. ability of workers to change the use of labour
2. can be a significant problem and lead to structural unemployment
3. can be increased by reforming the education system to give workers a basic set of skills that can be applicable to many jobs

Question 6

What does Increased labour market flexibility mean

Answer 6

1. will make the supply of labour more elastic and should increase employment and reduce wages depending on PED and demand for labour

Question 7

What is individual bargaining

Answer 7

1. negotiation between a single employee and the employer.
2. Can represent the views of one worker better but a large employer is unlikely to listen to a single worker, since the loss of a single worker to a firm is unlikely to be of any impact
3. power depends on the elasticities of supply or demand
4. information asymmetries e.g. employer knows how much they can increase wage by

Question 8

What is Trade unions/collective bargaining

Answer 8

1. negotiation between employer and group of employees.

2. More influential as t.u. typically have greater power

Question 9

What is Productivity bargaining

Answer 9

1. Agreement where employees agree to make changes which improve the productivity in order to receive higher wages

Question 10

What are results of productivity bargaining

Answer 10

1. this will increase the MRP which arguably should increase wages as lower costs per unit but also benefit firm.
2. Can also increase employment
3. could lead to a deterioration in conditions of employment e.g. longer working hours