The labour market Flashcards
What is derived demand?
demand for a good or service not for its own sake but for what it produced, eg labour
How does the law of diminishing marginal productivity apply to labour?
As labour increases, capital relatively more scarce so labour won’t be as efficient (or can only be by spending lots more money on capital).
Name three factors that affect the position of the labour demand curve.
- demand for product it produces
- availability and quality of technology used
- availability of capital
Name four factors that affect the shape of the labour demand curve, ie its elasticity.
- availability of substitutes, eg capital
- relative cost of labour to rest of budget
- time period of measurement
- price elasticity of demand for the product produced
What’s the opportunity cost to the worker of a wage?
leisure time
Name two effects on labour supply of higher wages
- substitution effect: higher opportunity cost of leisure, so increase to working hours
- income effect: higher income so can affort more leisure so reduction in working hours
What shape is an individual’s labour supply curve likely to be?
backwards C as substitution effect stronger at lower wages then income effect stronger at higher wages
What are non-pecuniary benefits?
non-financial benefits to workers
Give four examples of non-pecuniary benefits.
- subsidised canteen
- training
- job satisfaction
- job security
What shape is an industry’s labour supply curve likely to be and why?
upward sloping, as higher wages will attract workers from other industries or those not currently working
Name two factors that could affect the position of the labour supply curve.
- immigration / emigration
- unemployment benefits
Define the participation rate.
proportion of population of working age in employment or seeking work
Which labour supply curve will be more elastic, doctors or shop-workers?
shop-workers as less skilled (so more people could do the job without need for long training or certain level of intelligence)
Give three reasons why a labour market may not be competitive.
- entry controlled by governing body, eg actuaries
- trade unions may control who can be employed
- monopsony employer as single buyer of labour
Name two types of labour mobility.
- geographic
- occupational
Name four factors that cause geographic immobility of labour.
- cost of housing / moving house or transport
- social, eg want to stay near family or not disrupt children’s education
- information, eg difficult to find out about jobs in other areas
- immigration rules, eg Brexit means no free labour movement with EU now
Define minimum wage.
government set wage below which firms are not allowed to pay
In the UK, what does minimum wage depend on?
age and whether apprentice:
* age under 18 or apprentice get least
* age 18-20 get more
* age 21+ get most in form of national living wage
What are the three objectives of a minimum wage policy?
- prevent exploitation
- improve incentives to work
- alleviate poverty
Why might introduction of a minimum wage (above current equilibrium wage) increase unemployment?
- demand for labour reduced as wage higher
- supply of labour increased as more willing to work for that wage
If labour is geographically immobile, how can government increase employment?
“levelling up” eg by providing incentives for firms to move to areas of higher unemployment, eg Northern Powerhouse to revitalise cities in N England
What effects has Brexit had on UK labour market?
- shortage of workers eg HGV drivers, fruit pickers, hospitality
- increased public sector jobs in civil service
What effects has Covid-19 pandemic had on UK labour markets?
- short-term unemployment in eg hospitality sector (but cushioned by furlough scheme)
- more workers retiring early or withdrawing from workforce (ie to avoid the illness or in case of healthcare professional because of incresaed workload in the pandemic)
- more mobility from more working at home - but potentially reduced demand for labour eg in cafes near city-centre offices
- lower demand for shop workers given it accelerated demand for online shopping instead (bit more demand for warehouse workers)
