Schedule I(labour Markets) Flashcards
What is labour demand
How many workers hours an employer(firm) is wiling and able to hire at a given wage rate in a given time period.
What is the relationship between quantity of labour demanded and the wage rate. And why
Inverse. When wages are high it costs more to employ so quantity of labour demanded will be lower
What type of demand is labour demand
Labour demand is Derived from the demand for the product the worker is producing
What is the wage elasticity of labour demanded
Measures the responsiveness of demand when there is a change in the wage rate
What are 4 determinants for wage elasticity of labour demanded
- Labour costs as a % of total costs
- Ease and cost of factor substitution
- Price elasticity of demand for the final output
- Time period
Causes of shifts in labour demanded
- Rise in consumer demand
- Increase in labour productivity
- Government employment subsidy
- Change in cost of capital equipment
- During a recession firms shed labour
What is marginal revenue product of labour
The extra revenue a firm gains when an additional worker is employed, which depends on a worker’s productivity measured by the marginal physical product(MPP) and the marginal revenue(MR) of the last good sold.
How to calculate MRP
MRP = marginal physical product of labour x marginal revenue
Give me three factors that influence demand for labour in an industry such as construction
- Price of the good or service
- Price of productivity of labour
- Cost and availability of substitutes
Explain how robotics/AI might impact on demand for labour in occupations of your choice.
These technologies have the potential to replace human workers in a variety of occupations. For example, robots can perform tasks such as welding and surgery. Ai is being used to develop self-driving cars and trucks, which could reduce the need for human drivers
Give 3 positive effects on labour demand of technologies such as AI
- Derived demand - creates new jobs for engineers
- Might help smaller firms
- AI creates new markets and industries
What is labour supply
Labour supply is the number of hours workers are willing and able to supply at a given wage rate in a given market
What is the substitution effect of rising wages
Higher wages encourage workers to supply more labour hours because leisure time now has a higher oppuritnity cost
What is the income effect of a wage rise
Higher wages encourage workers to supply fewer hours because workers can get a higher income(or maintain their income) by working fewer hours
What is the elasticity of labour supply
Measures the extent to which labour supply responds to a change in the wage rate in a given Time period
What are 3 non-wage determinants of labour supply causing shifts
- Rate wage rate on offer in the industry
- Extra pay e.g. overtime payments
- Wages in substitute occupations e.g. increase in the earnings for plumbers and electricians may cause people to switch jobs
What would cause an outward shift of labour supply
- A rise in net inward migration of workers with relavent skills to this occupation
- A fall in relative wages in substitute jobs
- Impact of extra investment in human capital(training and education)
Why is labour immobility a significant problem
- Loss of economic efficiency and social welfare
- It is a cause of structural unemployment and economic vulnerability
- Causes Persistent relative poverty
What are policies to improve labour mobility and incentives
- reducing occupational mobility
- improving geographical mobility
- stimulating stronger work incentives
What are two causes of geographical immobility in the UK labour market
- Housing costs
- Family and social ties
