Section 7 - The Labour Market Flashcards
Economically active population
The people in an economy who are capable of, and old enough to, work (regardless of whether they’re employed or unemployed)
Derived demand for labour
Demand for goods increases, so does the demand for labour
Marginal productivity theory
The demand for any factor of production depends on it’s marginal revenue product (MRP)
Marginal revenue product of labour
The extra revenue gained by the firm from employing one more worker
Marginal Physical Product of labour
The output produced by the additional worker
MRPL equation
MPPL x MR
Marginal Cost of Labour
The cost of hiring one additional worker
(wage) Elasticity of demand for labour
The change in demand for labour when the wage level changes
Demand for labour
Comes from firms
Supply for labour
Comes from the economically active population
Individual’s labour supply
The total number of hours that a person is willing to work at a given wage rate
Pecuniary benefits
This is the welfare a worker gains from the wage they receive (or more specifically, what’s bought with it)
Non-pecuniary benefits
This is the welfare a worker can gain from non-wage benefits of their job
Wage differentials
The differences in wages between different groups of workers, or between workers in the same occupation.
Nominal wages
The amount of money that people are paid
Real wages
Take inflation into account and represent the actual purchasing power of people’s wages
Monopsony labour market
There’s a single employer, so workers have only one choice of employer to work for.
Trade Union
An organisation formed to represent the interests of a group of workers.
Collective bargaining
When a trade union negotiates with an employer
Productivity bargaining
Where unions agree to specific changes that’ll increase productivity in return for higher wages or other benefits for its members
Performance-related pay agreements
When workers get pay increases that are linked to the quality of their work and their productivity
Wage discrimination
When employers with monopsony power pay different wage rates based on different workers’ willingness to supply labour
Labour market discrimination
When a specific group of workers is treated differently to other workers in the same job
Racial Discrimination
When employers only want to work with and employ people from a particular ethnic background
