The Labour Market Flashcards
Define the term ‘wages’.
The payment to a worker for an hour’s worth of work
Define the term ‘salary’.
A fixed monthly payment to a worker regardless of how many hours they work
Define the term ‘demand for labour’.
The willingness and ability for firms to hire workers at the given wage rate
What are the 2 golden rules of demand for labour?
Everything wage related is a movement along the curve.
Everything else is a shift.
What are the 4 factors that affect demand for labour?
Labour is a derived demand
Cost/availability of substitutes
Productivity of labour
Costs of employing labour
How does labour being a derived demand affect the demand for labour?
The demand for labour increases or decreases depending on the demand for particular goods or services
How does the cost/availability of substitutes affect the demand for labour?
As machinery/technology becomes cheaper, businesses may switch to them from labour.
How does the productivity of labour affect the demand for labour?
If workers become less productive, firms may want to employ them for less hours - demand falls
How does the costs of employing labour affect the demand for labour?
If the government increases taxes on workers/the cost of recruitment increases, firms may decide to reduce the amount they use.
Define the term ‘supply of labour’.
The willingness and ability of workers to work at a given wage rate
What are the 7 factors that affect supply of labour?
Retirement age Immigration Population size Labour mobility Aging population School-leaving age Skills/education and training
How does population size affect the supply of labour?
The more a population grows, the greater the supply of labour.
How does immigration affect the supply of labour?
Countries with a high proportion of immigrants are likely to have a higher supply of labour.
How does the school-leaving age affect the supply of labour?
Inverse relationship - the lower it is, the higher the supply of labour
How do skills and qualifications affect the supply of labour?
It increases the supply of labour as people tend to become more employable when they learn new skills.
How does the retirement age affect the supply of labour?
As the retirement age increases, so does the supply of labour
How does the aging population affect supply of labour?
The population is getting older in certain countries so there’s a large proportion of people beyond retirement age - supply of labour decreases.
Define the term ‘labour mobility.
The ease at which workers can geographically and occupationally move between jobs
How does labour mobility affect the supply of labour?
The more easily workers can switch jobs, the higher the supply of labour.
What are the 6 factors that affect wage rate?
Desirability Dangerous jobs Discrimination Geographical differences Growing industries Skills and qualifications
How does desirability affect the wage rate?
Jobs that aren’t attractive (eg. garbage man) result in less supply of labour and higher wages.
How do skills and qualifications affect the wage rate?
People with higher educational qualifications/more experience are compensated with higher wages.
How does geographical differences affect the wage rate?
Workers are compensated with higher salaries in certain countries due to the higher cost of living.
How do dangerous jobs affect the wage rate?
Jobs that carry risk/danger often result in less supply of labour and higher wages.
How do growing industries affect the wage rate?
Growing industries have a higher demand for staff so they may offer higher wages.
How does discrimination affect the wage rate?
Some workers may be subject to lower wages due to their gender, age etc.
Define the term ‘aging population’.
The demographic shift in the age distribution of a population towards older ages
What are the 6 effects of an aging population?
Worker shortage
Higher taxes
Increase in dependency ratio
Changing sectors in the economy
Higher savings/reduced capital investment
More government spending on healthcare/pensions
Define ‘minimum wage’.
The minimum amount per hour which workers are legally entitled to be paid
Name 2 reasons why there is a minimum wage for workers.
To prevent exploitation of workers
To ensure workers are paid fairly to maintain a decent standard of living
Why does minimum wage cause unemployment?
It leads to a disequilibrium in the labour market with the supply of labour being higher than the demand for labour.
Why might unemployment not increase if the minimum wage increases? Give 3 reasons.
Firms will continue to hire if workers increase productivity faster than wage increases - more profit
As income increases, expenditure increases - labour is derived demand
Depends on magnitude of wage increase
What are the 3 advantages and 3 disadvantages of minimum wage for firms?
Pros:
More motivated workers
Greater output/productivity
Increased demand
Cons:
Increased cost of production
Reduced profit
Redundancy payments
What are the 3 advantages and 1 disadvantage of minimum wage for workers?
Pros:
Increased standard of living
Improved poverty rates
Fair wage - lack of discrimination
Cons:
Some workers may be redundnant
Name 3 ways trade unions help workers.
Give workers a larger voice
Campaign for worker rights
Improve communication between workers and management
Name 3 reasons why workers might not join a trade union.
They may:
Not be willing to pay the membership fee
Feel that it won’t benefit them professionally
Feel pressured into actions that they don’t agree with
What 4 factors does the effectiveness of trade unions depend on?
The number of workers they represent - more workers = more power
The profession the union represents - some more essential than others
State of the economy - growth vs recession
Laws/legislation - how much power they have
