The labour market Flashcards
How does labour supply determine wages?
When labour increases, wages decrease and employment increases, because firms can easily replace workers
Who is the supplier in the labour market?
The workers who are offering (supplying their labour)
Who are the demand in labour markets?
The firms employing workers (consuming the labour)
What factors affect the supply of labour?
- Wage rate (the higher it is, the more people will offer their services)
- Other monetary benefits (bonuses, pensions etc.)
- Structure of population (more people = more workers, aging population = smaller workforce)
- Fringe benefits (benefits form job that aren’t monetary)
- Education and training (more training leads to more people able to work)
What factors affect demand of labour?
- Performance of economy (more people consuming means firms need more labour to meet demand)
- Changing demand in specific markets (more demand for product = more labour, less demand for product = less labour)
- Wage rates (lower wage rates means more labour can be afforded)
- Productivity of labour (as workers become more productive, less labour is needed)
- Profitability of firms (the more profit a firm has, the more labour they can afford)
What is gross pay?
The total pay before deductions (tax, contributions, repayments)
What is net pay?
Pay after deductions (money that goes into bank account)
Gross pay - deductions
How do you calculate income?
Weekly wage x 52 = Annual pay
What is elasticity in labour?
%change in quantity / %change in wages
Highly skilled jobs tend to be inelastic
If there is high levels of unemployment then it will be more elastic
What causes differences in wages?
High paying jobs require a good education and training. There are less jobs and applicants.
Low paying jobs don’t require good skills or education. There are many jobs and employees.
