The Labour Market

Question 1

Define the term ‘wages’.

Answer 1

The payment to a worker for an hour’s worth of work

Question 2

Define the term ‘salary’.

Answer 2

A fixed monthly payment to a worker regardless of how many hours they work

Question 3

Define the term ‘demand for labour’.

Answer 3

The willingness and ability for firms to hire workers at the given wage rate

Question 4

What are the 2 golden rules of demand for labour?

Answer 4

Everything wage related is a movement along the curve.

Everything else is a shift.

Question 5

What are the 4 factors that affect demand for labour?

Answer 5

Labour is a derived demand
Cost/availability of substitutes
Productivity of labour
Costs of employing labour

Question 6

How does labour being a derived demand affect the demand for labour?

Answer 6

The demand for labour increases or decreases depending on the demand for particular goods or services

Question 7

How does the cost/availability of substitutes affect the demand for labour?

Answer 7

As machinery/technology becomes cheaper, businesses may switch to them from labour.

Question 8

How does the productivity of labour affect the demand for labour?

Answer 8

If workers become less productive, firms may want to employ them for less hours - demand falls

Question 9

How does the costs of employing labour affect the demand for labour?

Answer 9

If the government increases taxes on workers/the cost of recruitment increases, firms may decide to reduce the amount they use.

Question 10

Define the term ‘supply of labour’.

Answer 10

The willingness and ability of workers to work at a given wage rate

Question 11

What are the 7 factors that affect supply of labour?

Answer 11

Retirement age
Immigration
Population size
Labour mobility
Aging population
School-leaving age
Skills/education and training

Question 12

How does population size affect the supply of labour?

Answer 12

The more a population grows, the greater the supply of labour.

Question 13

How does immigration affect the supply of labour?

Answer 13

Countries with a high proportion of immigrants are likely to have a higher supply of labour.

Question 14

How does the school-leaving age affect the supply of labour?

Answer 14

Inverse relationship - the lower it is, the higher the supply of labour

Question 15

How do skills and qualifications affect the supply of labour?

Answer 15

It increases the supply of labour as people tend to become more employable when they learn new skills.

Question 16

How does the retirement age affect the supply of labour?

Answer 16

As the retirement age increases, so does the supply of labour

Question 17

How does the aging population affect supply of labour?

Answer 17

The population is getting older in certain countries so there’s a large proportion of people beyond retirement age - supply of labour decreases.

Question 18

Define the term ‘labour mobility.

Answer 18

The ease at which workers can geographically and occupationally move between jobs

Question 19

How does labour mobility affect the supply of labour?

Answer 19

The more easily workers can switch jobs, the higher the supply of labour.

Question 20

What are the 6 factors that affect wage rate?

Answer 20

Desirability
Dangerous jobs
Discrimination
Geographical differences
Growing industries
Skills and qualifications

Question 21

How does desirability affect the wage rate?

Answer 21

Jobs that aren’t attractive (eg. garbage man) result in less supply of labour and higher wages.

Question 22

How do skills and qualifications affect the wage rate?

Answer 22

People with higher educational qualifications/more experience are compensated with higher wages.

Question 23

How does geographical differences affect the wage rate?

Answer 23

Workers are compensated with higher salaries in certain countries due to the higher cost of living.

Question 24

How do dangerous jobs affect the wage rate?

Answer 24

Jobs that carry risk/danger often result in less supply of labour and higher wages.

Question 25

How do growing industries affect the wage rate?

Answer 25

Growing industries have a higher demand for staff so they may offer higher wages.

Question 26

How does discrimination affect the wage rate?

Answer 26

Some workers may be subject to lower wages due to their gender, age etc.

Question 27

Define the term ‘aging population’.

Answer 27

The demographic shift in the age distribution of a population towards older ages

Question 28

What are the 6 effects of an aging population?

Answer 28

Worker shortage
Higher taxes
Increase in dependency ratio
Changing sectors in the economy
Higher savings/reduced capital investment
More government spending on healthcare/pensions

Question 29

Define ‘minimum wage’.

Answer 29

The minimum amount per hour which workers are legally entitled to be paid

Question 30

Name 2 reasons why there is a minimum wage for workers.

Answer 30

To prevent exploitation of workers

To ensure workers are paid fairly to maintain a decent standard of living

Question 31

Why does minimum wage cause unemployment?

Answer 31

It leads to a disequilibrium in the labour market with the supply of labour being higher than the demand for labour.

Question 32

Why might unemployment not increase if the minimum wage increases? Give 3 reasons.

Answer 32

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

Question 33

What are the 3 advantages and 3 disadvantages of minimum wage for firms?

Answer 33

Pros:
More motivated workers
Greater output/productivity
Increased demand

Cons:
Increased cost of production
Reduced profit
Redundancy payments

Question 34

What are the 3 advantages and 1 disadvantage of minimum wage for workers?

Answer 34

Pros:
Increased standard of living
Improved poverty rates
Fair wage - lack of discrimination

Cons:
Some workers may be redundnant

Question 35

Name 3 ways trade unions help workers.

Answer 35

Give workers a larger voice
Campaign for worker rights
Improve communication between workers and management

Question 36

Name 3 reasons why workers might not join a trade union.

Answer 36

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

Question 37

What 4 factors does the effectiveness of trade unions depend on?

Answer 37

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