T3 LABOUR MARKETS Flashcards
What are the three main factors that affect elasticity of labour demand?
Substitutes
% of Total Cost
Time
How do substitutes affect the elasticity of labour demand?
If workers are easy to substitute/replace, demand will be elastic.
If workers are hard to substitute/replace, demand will be inelastic.
How does % of total cost affect the elasticity of labour demand?
If wages make up a small % of total cost, any increase in wage will have a small impact, so demand for labour will be unresponsive and therefore inelastic.
How does time affect the elasticity of labour demand?
In the short run, without enough time to search for substitutes, firms won’t be able to respond much so demand for labour will be inelastic.
If demand is inelastic, how does that affect wages
If demand is inelastic, we’ll see higher wages.
What are the three main factors that affect elasticity of labour supply?
Skills & Qualifications
Unemployment
Time
What is derived demand
demand for a factor of production (like labour) that is derived from the demand of another good/service.
What are non-pecuniary benefits
are all the benefits of a job other than the wage you’re paid to do it.
What are some example non-pecuniary benefits
Job satisfaction, company holidays/parties, company car
How can the nhs offer such low wages to doctors
NHS owns 90% of the UK healthcare industry, making them a monopsony.
What is a monopsony
When there is only one buyer in a market
Explain how a monopsony can reduce the wages it pays its workers. (3)
A monopsony is when there’s only one buyer in the market
A monopsony can reduce the wages it pays its workers and the workers will have no choice but to accept, because they have nowhere else to work.
What is the national minimum wage
The lowest wage employers can legally hire a worker for.
What does a national minimum wage placed above equilibrium lead to
Excess supply/unemployment
What are the two results of implementing a national minimum wage
Higher wages for employees but decreased employment
What are trade unions
A trade union is a group of workers who collectively bargain to improve employee welfare.
What is a maximum wage
The highest wage employers can hire a worker for
What does a maximum wage set below equilibrium wage lead to
Excess demand / shortage
What are the two results of a maximum wage
Lower wages for employees and labour shortages
What does occupational immobility of labour often lead to:
Structural unemployment
what are 3 ways the government can intervene to improve occupational mobility
Education
training
apprenticeships schemes
What is occupational immobility
Occupational immobility is when workers can’t move between different jobs because they lack the skills needed.
What is geographical immobility
Geographical immobility is when workers struggle to move between different areas.
What are the causes of labour market failure
Occupational immobility
Geographical immobility
