Theme 3 - Labour market Flashcards
What are the 6 factors affecting demand for labour?
Wages
Demand for product
Price of factors of production
Wage in another country
Technology
Regulation
How do wage rates impact demand for labour?
Higher wages, less demand.
Lower wages, more demand.
How does the demand for a product impact the demand for labour?
When demand for a product increase, firms want to employ more staff and so demand for labour rises
How does prices of other factors of production impact demand for labour?
If machinery and equipment become cheap, firms will switch to machinery.
How does wages in other countries impact demand for labour?
If wages in other countries are lower, demand for labour in the host country will fall.
How does technology impact demand for labour?
A rise in technological advancements means that demand for labour may decrease
How does regulation impact demand for labour?
High laws and regulations around labour markets may cause less demand for labour
What are the 4 factors affecting the PED of labour?
- Elasticity of demand of goods
- Wages as a % of total costs
- Substitutes for labour
- Inelastic labour in the SR
Explain how labour is inelastic in the short run
In the short run if a firm wants to increase output they have no choice but to employ new staff however, in the long run, machinery and jobs are more elastic
What is marginal revenue product?
Extra revenue from hiring a new worker
What is marginal physical product
Extra output of hiring a new worker
What are the 7 factors that affect the supply of labour?
Wages
population and age
non-monetary benefits
qualifications
trade unions
conditions of other jobs
legislation
How does population and age impact the supply of labour?
When a population has majority of people at working age, this means that there is more supply of labour.
What are non-monetary benefits and how do they increase the supply of labour?
Non-financial incentives such as a good social life etc may increase the supply of labour
How do trade unions impact the supply of labour?
Trade unions can increase the supply of labour by encouraging firms to employ them etc
How do conditions of other jobs impact the supply of labour?
Supply for labour will be lower in an area that offer higher wages than another occupation
What are the two types of market failure in labour markets?
Occupational immobility and geographical immobility
What are the 2 factors that affect the elasticity of supply of labour?
- Level of training and qualifications
- Time
How does the level of training impact the elasticity of supply?
Highly skilled jobs means that only people with certain qualifications can gain that job making it inelastic
How does time impact elasticity of supply?
In the long run, more people can train and gain skills making supply of labour more elastic
3 Ways in which a minimum wage can be beneficial to the economy
- Can help to reduce poverty
- Employees may feel more loyal to the business
- Reduced labour turnover may mean workers are more productive.
What are 3 negatives of a minimum wage?
- Increase costs for companies leading to inefficiencies
- Regional imbalances
- Higher unemployment if people earning more now earn less
What is a maximum wage?
A maximum wage is when the government intervenes to cap how much earners can earn in specific sectors
The main benefit of a maximum wage
A reduction in inequality and poverty because higher income earners can no longer earn substantial amounts
What are the 3 factors that affect elasticity of demand?
Substitutes, percent of total cost and time (LED)
What are the 3 factors affecting elasticity of demand?
Qualifications and skills, unemployment and time (LES).
What is marginal revenue product?
This states that for an additional worker, how much extra revenue that extra worker brings into the business
How does marginal revenue product depend on the elasticity of labour?
For an inelastic labour supply, the business will see a greater increase in marginal revenue product than for elastic labour supply
What are some reasons for wage differentials in a competitive market?
- Differences in skills and qualifications
- Public vs private sector workers
- Discrimination: race and gender
- Elasticity of supply and/or demand
- Immobility of labour
What are some evaluations of reducing wage differentials in a competitive market?
- Trade union power
- National minimum wage
- Investments in training and skills
- HS2 spending
