Theme 3.5: Labour Market Flashcards

Question

Describe labour immobility

Answer 1

Barriers to labour being able to move between jobs Can be considered a form of market failure, especially if it leads to unemployment

Answer 2

When workers find it difficult to move jobs from one region to another Reasons: * Poor transport infrastructure * High price of housing/cost of living in other areas * Lack of knowledge of jobs in other areas * Limited flexibility if in council housing * Family/community ties in existing area * Language barriers (e.g. within EU)

Answer 3

When workers find it difficult to move from one occupation to another Reasons: * Skills may not match jobs that are available * Barriers to entry in some professions – e.g. professional bodies/qualification * High cost of retraining * Long period of time to train towards a new profession

Answer 4

1. Housing based solutions 2. Transport based solutions 3. Regional solutions 4. Information solutions

Answer 5

* Providing relocation subsidies to workers who have to move house to get a job * Reforms to the housing market designed to improve the supply and reduce the price of rented properties and to increase the supply of affordable properties

Answer 6

* Improving quality of transport infrastructure, e.g. HS2 * Subsidise public transport to make it more affordable, so more workers have access to a wider range of jobs

Answer 7

Subsidies & financial incentives for job types in regions with shortages of specific types of labour

Answer 8

Provision of information of available jobs in other regions, e.g. job centres

Answer 9

**Improving education** * Improving the types of skills taught so that the skills are more flexible between jobs * Should lead to greater transferabilit of skills between careers in the longer term **Provide specific training** * Targeted training at skills shortages in the economy, e.g. STEM, nurses etc.

Answer 10

Subsidising employers who take on unemployed workers: incentive for employers who might not otherwise take on certain workers Reform the tax and benefit system: raise minimum wages or reduce the level of unemployment benefits

Answer 11

**Equity**: Every job should offer a fair rate of pay for the skills and experience of an employee **Labour market incentives**: The NMW is designed to improve incentives for people to start looking for work – thereby boosting the economy's labour supply **Labour market discrimination**: NMW is a tool designed to offset some of the effects of persistent discrimination of many low-paid female workers and younger employees

Answer 12

Rise in prices: rise in production costs might be passed on to consumers BUT many goods and services are likely to be unaffected: firms which don't employ low wage workers will be unaffected, goods with elastic PED won't pass on much increase in price

Answer 13

Higher wages: Positive impact on spending power and living standards BUT potential job losses from a rise: The greater costs to businesses causes less demand for workers, however, if raised gradually, impact on jobs might be minimal (employers have more time to adjust)

Answer 14

Rise in labour costs: fall in profits (P = R - C), particularly relevant to firms where labour costs are a significant proportion of total costs - e.g. hospitality, retail BUT greater spending in the economy could create extra demand, e.g. a restaurant may have more customers as a result of lower paid workers earning more

Answer 15

Fall in SRAS, rise in AD **Growth**: Fall in SRAS 🡪 lower real output, but rise in AD could counter this **Inflation**: Fall in SRAS 🡪 cost push inflation, rise in AD 🡪 demand pull inflation **Unemployment**: Loss of jobs could increase unemployment, rise in AD could counter this **Current account**: Higher costs worsen competitiveness which is bad for exports, rise in AD could lead to more spending on imports, increased work incentive could raise LRAS 🡪 increasing competitiveness Increased work incentive could raise LRAS 🡪 increased competitiveness

Answer 16

Reduction in inequality: rise in pay of lowest paid in the economy, closes the gap between the low pay and average wages BUT bigger employment gap: those out of work may fall further behind, e.g. those on unemployment, disability or pension benefits

Answer 17

A wage ceiling above which wages cannot be set Helps to narrow the gap between the pay of the richest and the pay of the poorest in the company Typically seen as a maximum ration gap between the highest and lowest paid in a company, e.g. 1:20 maximum wage ration means the CEO of a company would earn no more than 20x the pay of the lowest paid within the company

Answer 18

Rise in wages: A maximum wage ratio would limit the ability of CEOs to raise their own wages without raising the wage of their lowest paid employees. A company paying the NLW in the UK of £11.44 would have a maximum CEO salary of around £475,000. For CEOs wanting to earn more than this, it creates an incentive to pay their lowest paid workers more BUT companies might just outsource low paid work, worsening job security and conditions

Answer 19

Reduced incentinve for higher paid workers to work: they could earn more in other countries / industries. Potential brain drain effect BUT greater incentive to take up lower paid work: bigger gap between unemployment benefits and lowest paid jobs = bigger incentive for unemployed people to take up work. Increase in pay for the lowest earners would increase this incentive

Answer 20

Reduction in the gap between the richest and poorest workers: maximum wage ratio prevents the difference between rich and poor workers going beyond a set level. Impact is particularly relevant to multinational companies where CEO has increased at a rapid rate in recent decades BUT richest could find loopholes to ensure higher pay without counting towards a wage ratio, e.g. payment through shares, expenses etc.

Answer 21

1.5 million