The Labour Market Flashcards
describe wage determination using simple demand analysis
- demand for labour is derived demand: it is directly linked to the demand of the product being made
- the price of labour is wages: at high wage rates demand will be low and at low wage rates demand will be high
- if the product is price inelastic, firms will find it easier to increase wages as the cost can be passed onto the consumer
describe wage determination using simple supply analysis
- supply of labour is the number of people of working age offering themselves for employment
- the reward for labour is a wage: the higher the wage, the more people will offer their services. wages is related to skills, qualification and experience
- workers as economic agents seek to maximise their profits
explain the factors affecting supply of labour
population migration:
- increases supply of labour as more people come into a country seeking employment
- often willing to work for minimum wage
income tax and benefits:
- high income tax and high benefits acts as a deterrent to the supply of labour
explain what is meant by wage differentials
the differences in wages that workers obtain for their services:
- high demand and low supply will lead to higher wage rates
- low demand and high supply will lead to lower wage rate
workers will try to develop their human capital over their lifetime to increase their value
explain why workers might earn different wages
- different groups of workers will earn different wage rates due to the value of their human capital
- trade unions use collective bargaining to increase the wages of members
- the national minimum wage and anti-discrimination legalisation will affect wage rates
state what is meant by gross pay
total before any deductions
statutory deductions - what you have to pay: income tax
voluntary deductions - what you choose to pay: pension contributions
state what is meant by net pay
take home pay after deductions
