Pack 5: Labour Markets Flashcards
What is derived demand?
Goods demanded only because they are needed for production of other goods
What causes shifts in labour demand?
~Demand for final product
~Productivity
~Change in price of capital
~Tech development
What is the wage elasticity of demand for labour?
The responsiveness of quantity demanded of labour to change in wage
What causes shifts in the labour supply?
~Size of the working population
~Skill and qualifications required
~Wages in substitute occupations
~Non-monetary characteristics
What is wage elasticity of supply for labour?
Responsiveness of quantity of labour supplied to a change in wage
What can competitive labour market diagrams also be used to show?
Wage differentials
What are the key topical issues with wage differentials?
~Differences between occupations, e.g. Banker and footballer pay
~Differences between genders, e.g. male-female pay gap
What are the key factors in determining wages in non-competitive markets?
~Monopsony power
~Trade unions
What is monopsony power?
Single or few dominant buyers, in this case firms for employing workers, wages could be driven below equilibrium
What is the role of trade unions?
~Can negotiate wages above market equilibrium through strike action, however labour demand will contract increasing unemployment
~If wages already below equilibrium they can increase wages and employment using counter-veiling power
What is labour immobility?
Inability of workers to take available work, either geographically or occupationally
What is geographic immobility?
Inability of workers to take available work in different areas/regions
What is occupational immobility?
Inability of labour to change occupations to take available work
