Theme 3.5 Flashcards
What is the labour market?
A factor market where the supply of labour is determined by employees and the demand by employers.
What does derived demand mean in the context of labour?
The demand for labour comes from the demand for the products it produces.
How does the wage rate affect the demand for labour?
Higher wages may lead firms to switch to cheaper and more productive capital.
What factors affect the demand for labour?
- Wage rate
- Demand for products
- Productivity of labour
- Substitutes for labour
- Profitability of the firm
- Number of firms in the market
How is the supply of labour calculated?
By the number of workers willing and able to work at the current wage rate, multiplied by the number of hours they can work.
What factors influence the supply of labour?
- Wage rate
- Demographics of the population
- Migration
- Advantages of work
- Leisure time
- Trade unions
- Taxes and benefits
- Training
What is geographical immobility in the labour market?
Obstacles preventing labour from moving between areas.
What is occupational immobility in the labour market?
Obstacles preventing labour from changing its use or occupation.
What are wage differentials?
Differences in pay for the same job due to factors like skills, qualifications, and training.
What impact does migration have on labour markets?
- Increased competition for jobs
- High-quality skills introduced
- Potential downward pressure on wages for the lowest paid
- Possible substitution of skills
What is frictional unemployment?
Temporary unemployment occurring when individuals are transitioning between jobs.
What does the National Minimum Wage represent?
A minimum price for labour that must be set above the free market price to be effective.
What is a maximum wage?
A wage ceiling that limits how much income someone can earn.
What are the effects of excessive regulation on the labour market?
Limits flexibility in hiring and firing, reducing the responsiveness of labour to market changes.
How does the elasticity of demand for labour relate to the costs of labour?
Higher costs of labour as a proportion of total costs make demand for labour more elastic.
What factors affect the elasticity of supply of labour?
- Skills of the workforce
- Length of training
- Sense of vocation
- Time period
True or False: The supply of labour is always inelastic in the short run.
True.
Fill in the blank: The more _______ the product, the more price elastic the demand for labour.
[price elastic]
What is the significance of a skilled workforce in terms of labour supply elasticity?
Skilled jobs have lower elasticities because attracting workers with necessary skills is more difficult.
What is the impact of generous welfare payments on labour market flexibility?
It is likely to lower flexibility in the labour market.
What is hysteresis in relation to youth unemployment?
Long-term unemployment leading to skill deterioration, making it harder for young people to find jobs.
