The Labour Market Flashcards
What type of demand is labour?
Derived demand
What does the marginal productivity theory say?
The demand for any factor of production depends on its marginal revenue product
What is marginal revenue product?
The extra revenue gained by the firm from employing one more worker
What is the formula for marginal revenue product?
MRP = MPP X MR
What is the marginal physical product of labour (MPP)?
The output produced by each additional worker
What is the marginal cost of labour?
The cost of hiring one additional worker
When does a firm have an optimal number of workers?
When MRP of labour is equal to MC of labour
When is a firm employing too few workers?
When MRP of labour is greater than MC of labour
When is a firm employing too many workers?
When MRP of labour is less than MC of labour
What is a firm’s demand for labour generally affected by?
Productivity
What do high unit costs suggest?
There is low productivity
What is an individual’s labour supply?
The total number of hours which that person is willing to work at a given wage rate
What is the labour supply for an occupation?
The number of workers willing to work in that occupation at a given wage rate
What is supply of labour in the long run determined by?
Monetary and non-monetary factors
What is a monetary benefit?
The welfare a worker gains from the wage they receive
What is a non-monetary benefit?
Advantages or rewards that employees or individuals receive that are not in the form of direct financial compensation
What factors can affect supply of labour?
Wage rate
Non-monetary benefits
Population size
Education / Training
Working conditions
Social factors
What type of job is supply of labour elastic for?
Low skill jobs
Part-time / Temporary jobs
What type of job is supply of labour inelastic for?
High skill jobs
Significant barriers to entry jobs
Small niche jobs
What are wage differentials?
Skills / Qualifications
Industry and sector
Geographical location
Discrimination
What are the the reasons for wage differentials?
Low supply of qualified labour
Low willingness to do job
Productivity is rewarded
Cost of living
What is a trade union?
An organization of workers formed to protect and promote their interests
What are the aims of a trade unions?
Higher wages for members
Improved working conditions
Job security
Training and development
What are productivity bargains?
Agreements between trade unions and employers to link pay increases to productivity improvements
What is a downside of trade unions?
Higher labour cost
May cause industrial action (strikes)
Restrict flexibility in hiring
What is wage discrimination?
When workers with the same productivity are paid differently based on characteristics unrelated to their job
What is labour market discrimination?
When certain groups face unequal treatment in hiring, wages, or promotions based on factors unrelated to productivity
What are the advantages of wage discrimination?
Lower costs for employers
Increased employment
Cost advantages
What are the disadvantages of wage discrimination?
Reduces morale
Inefficiency
Inequality
Legal consequences
Market failure
What happen to employers as a result of discrimination?
Reduced productivity
Higher turnover
Legal and reputational risk
Inefficiency
Lost market opportunities
What happen to the government as a result of discrimination?
Increased welfare cost
Economic inefficiency
Social unrest
Lower tax revenues
What is the national minimum wage?
The legal minimum hourly wage employers must pay workers
What are the advantages of a national minimum wage?
Reduces poverty
Decreases income inequality
Increases work incentives
Boosts productivity
Stimulates demand
What are the disadvantages of a national minimum wage?
Increased unemployment
Higher business costs
Inflationary pressure
Regional differences
Reduced competitiveness
