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Economics > TOPIC 4 ECO (chapter 9-11) > Flashcards

TOPIC 4 ECO (chapter 9-11) Flashcards

check the textbook summaries and recheck the info that may be missed.

1
Q

labour market

A

individuals seeking employment interact w/ employers who want to obtain most appropriate labour skills for their production process

micromarkets 1 for each individual firm & industry, and 1 for local areas & occupations, each with own labour market outcomes (wage levels, employment opp, conditions)

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2
Q

how do firms demand labour. why?

A

offer wages
-DERIVED DEMAND for g&s within eco
-consumers demand higher lvls g&s, firms forced to increase lvl output to meet
-mut higher more labour to produce more

ONLY demanded bc needed for firm to produce g&s and make profit

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3
Q

labour demand curve

A

downward sloping curve
as price of labour (wages) falls, firm will employ more labour

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4
Q

factors that determine how much labour a firm will demand at specific price & how it will respond to eco conditions

A
  1. OUTPUT of firm
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5
Q

how does output of firm affect labour demand

A

bc derived demand, level of output is msot sig influence
-higher sales –> ^ production –> ^ demand for labour

eco conditions affect lvl output (pattern of consumer demand + demand for g&s firm produces)

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6
Q

aggregate demand

A

total demand for g&s within eco

C, I, G and X
conumption, investment, GVT spending, net exports

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7
Q

hwo does general eco conditions affect output lvl of firm time lag!!!

A

strong growth, firm likely have higher sales –> need more employees

only few firms benefit from eco downturn and employ more (discount retailer)

always time lag
-tend to operate with excess capcity, dont always fully utilise resources
-hoard labour to avoid training new staff when production picks up

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8
Q

what happens when aggregate demand increases for firm short term

A

firms satisfy higher demand (short) by using existing labour & capital resources intensively (eg. ask overtime)

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9
Q

what happens when aggregate demand falls for firm

A

delay making staff redundant hoping conditions improve & avoid costs & risks of finding new staff when eco recovers
-usually retrench workers when facing SUSTAINED deterioration in eco conditions

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10
Q

3 conditions that affect output level of firm

A
  1. general eco conditions (aggregate demand)
  2. conditions in firm’s industry (trends)
  3. demand for a firm’s products
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11
Q

how do conditions in a firm’s industry affect its level of output?

A

change in consumer tastes & preferences for g&s –> change allocation of labour betw diff industries (labour is derived demand)

industry’s barriers to entry, lvl regulation/price comp affects demand for albour –> increase in industries w/ ^ demand for their products & decrease for those experiencing lower demand

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12
Q

how does demand for individual firm’s products affect a firm’s level of output

A

output ultimately determined by effectiveness in selling g&s in marketplace
-quality of products
-reputation & size of firm
-customer service
-marketing efforts

even overall decline in demand in industry, possible for firm to achieve growth in output if increases market share

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13
Q

how does labour productivity affect demand for labour

A

firm must determine how to organise production
-use labour more intensively/relying heavily on tech & automated processes
-productivity of labour & labour costs compared with other inputs (capital) determine extent firm uses labour in production

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14
Q

labour productivity formula

A

total output
/
labour input

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15
Q

what does labour productivity depend on?

A

quality of workforce
-lvl education, skill, health

how efficiently labour can be combined with FOP in production process
-eg investment in tech allows more produced for each hour of labour input

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16
Q

what does higher labour productivity in the short run indicate

A

fixed no. workers produce more g&s –> output of firm rising w/o firm increasing no. workers

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17
Q

what will the overall effect of an increase in productivity on demand for labour (short) depend on?

A
  1. current level of aggregate demand
  2. cost of other inputs (capital, including foreign operations)
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18
Q

if aggregate demand is rising, how will this affect productivity from demand for labour?

A

higher demand for g&s
-if rising faster rate than ^ productivity, higher demand > higher production from existing workers
-bus will increase demand for labotu to meet higher lvl of AD

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19
Q

if aggregate demand is unchanged, how will this affect the productivity & the demand for labour (short)

A

if labour productivity rising, existing workers producing more g&s BUT wont be any higher demand
-bus have EXCESS capacity & won’t need more labour

demand for labour decline
-higher productivity = bus cut on workers & still produce same output as before

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20
Q

if aggregate demand is FALLING, how will this affect productivity & demand for labour

A

AD falling but labour productivity RISING, demand for labour FALL MORE
-existing workers produce more output, still less demand for output in eco
-if bus maintain profits, lower demand for labour

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21
Q

how will higher labour productivity make labour a more attractive inut to production than the other FOP in LONG RUN

A

firm may shift towards labour production methods if more productive (capital too exp)
-increase labour demand

if prod labour < improv tech & capital, LD may decline
-new tech improve efficiency of capital investment & create cheaper alt prod methods, allow firms to reduce demand ofr labour while output levels same/increase

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22
Q

how do cost of other inputs affect demand for labour

A

firms have range of options for combination of labour and CAPITAL (equip)
-if new tech reduces costs, firms use more capital inputs in PP & less labour
-if labour costs fall, firms shift to labour > capital in PP

capital is sub for labour
-changes in price price of capital have similar effecto n demand for labour

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23
Q

when will a firm’s demand for labour be more ELASTIC (responsd more sharply to price changes)

A
  1. easy to sub betw labour & capital
  2. labour costs relatively high prop of total costs
  3. more diff for firm to pass increased labour costs as higher prices to consumers
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24
Q

labour-on costs

A

additional costs of employing labour
-sick leave
-holiday pay
-superannuation

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25
Q

ceteris parabus, law of demand (for labour)

A

employ more labour when cost of labour declines

employ less labour when cost of labour increases

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26
Q

why is interest rate most important in cost of capital?

A

represents cost of borrowing funds to purchase new capital equip

represents opp cost if firm using own funds to finance capital expenditures
-could be earning returns on funds than investing back into bus operations

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27
Q

what are the factors determining the cost of capital

A

INTEREST RATES

tax system structure (special tax allowances might encourage greater bus investment)

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28
Q

besides labour & capital, what else may firms consider for its labour demand

A

shifting some operations overseas (engage w/ overseas contractors to manufacture goods/provide services offshore)
-esp if labour costs lower elsewhere

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29
Q

6 output factors influencing labour demand

A
  1. general eco conditions
  2. conditions in firm’s industry
  3. demand for indivudal firm
  4. productivity of labour vs other inputs
  5. cost of labour vs other inputs
  6. cost of labour bs cost of foreign labour
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30
Q

human capital

A

knowledge, skills, training, experience of workers contributing to PP

reflects quality of labour force

main influence on producitvity growth

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31
Q

what 5 factors influence the SUPPLY of labour?

A
  1. pay levels
  2. working conditions
  3. edu, skills & experience requirements
  4. mobility of labour
  5. labour force participation rate
  6. other factors
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32
Q

how do pay levels affect the supply of labour?

A

wage/salary paid to employees for labour for firm/industry
-higher pay offered, more ppl prepared to sacrifice leisure time & supply labour
-non-wage/salary incentives can be included in employee’s remuneration package
(superannuation benefits)

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33
Q

how do working conditions affect supply of labour?

A

attractive working conditions encourage higher supply of labour to workplace
-those offering flexible owrking hrs, opp to work** from home,** generous holiday leave entitlements & positive working environment attracts more labour

some jobs offer opp to travel, training opp & experience, higher lvl job satisfaction

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34
Q

how does education, skills & experience requirements affect supply of labour?

A

jobs require lvl training/experience or formal qualification/license (HUMAN CAPITAL)
-supply of labour limited by availability of human capital (no. ppl w/ appropriate skilsl for jobs)
-jobs with advanced skills –> labour supply shortages (acquiring skills can take years/sig costs)
-country’s edu & training system & skill-based immigration helps determine supply of skileld workers

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35
Q

hwo does mobility of labour affect supply of labour?

A

affected by responsiveness to changes in demand for labour in diff areas & industries

** occupations** require workers to relocate to distant locations with fewer educational & entertainment opps will receive lower supply of laobur
-employers in remote locations need to offer higher wages to attract workers

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36
Q

what are the 2 types of labour mobility

A

occupational & geographical mobility

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37
Q

occupational mobility

A

ability of labour to move betw diff occupations responding to wage differentials & employment opps
-degree depends on edu & skilsl required for certain occupation & time taken to gain credentials (hard for mechanic to become surgeon)

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38
Q

geographical mobility

A

ability of labour to move betw diff locations in response to IMPROVED wage differentials & employment opps

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39
Q

2 factors the limit geographical mobility of labour

A
  1. COSTS of RELOCATING
    -travel, transportation, real estate costs
  2. PERSONAL UPHEAVAL with moving
    -breaking familial ties & changing schools
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40
Q

working-age population

A

no. ppl in eco 14+

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41
Q

labour force/workforce

A

all employed & unemployed ppl in country at PIT

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42
Q

how does the labour force participation rate affect supply of labour?

A

some ppl wanna undertake further study, take care of family, concentrate on lesiure acitivites (rely on other forms of income)

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43
Q

trends in LFPR in AUS (men & women as well)

A

overall risen slowly over past 3 decades

sig changes to male & female participation rates
-male DROPPED CONSIDERABLY
-females continued to increase over past 50 yrs, driven by ^ participation of married women in owrkforce
-gap betw participation rates shrunk over 30%

44
Q

short term influences on participation rate

A

STATE OF ECONOMY
PR pro-cyclical
-times of prosperity & eco growth, ppl inclined to seek work to find better job)
-recession, ppl less optimistic abt job prospects, less inclined

45
Q

long term influences of participation rate

A

AGEING POPULATION TRENDS & age of retirment
-overall PR will decrease as prop of pop over 65yo increases, majority in retirement
-however retire later, more jobs in less labour-intensive roles

SOCIAL ATTITUDES
-increase participation of women in workforce
-increased childcare support
-lower fertility rates
-increased age women qualify for age pension

INCREASED SCHOOL RETENTION RATES
-growing tendency for young ppl to remain at school longer & seek full-time tertiary education
-join workforce later in life

46
Q

what are the ‘other factors’ affecting supply of labour?

A

GVT POLICY decisions/ collective action of those providing labour within industry

-AUS historically filled labour market gaps w/ immigration, policies heavily weighted towards** skilled** migrants

-trade unions eg. Law Society impose standards of edu, continuing training & professional conduct
-restricts supply of labour

GVT limit supply of labour to certain occupations by imposing certain qualification & licence RESTRICTIONS

47
Q

when is a person calssified as employed

A

1/+ hrs of work per week

48
Q

what are the 2 most important aspects of the workforce?

A

SIZE
-bigger workforce, greater contribution to producnig g&s

QUALITY of labour
-well educated, highly skilled workforce more productive

49
Q

what 3 factors affect the size & quality of the workforce?

A
  1. size of population
  2. age distribution
  3. educational patterns
50
Q

how does population size affect size & quality of workforce?

A

sets limit to which workforce can grow
-larger population, greater potential workforce

influenced by 1. NATURAL INCREASE 2. NET MIGRATION

51
Q

natural increase of migration

A

births > deaths in pop over 1 year

52
Q

net migration + during strong eco growth

A

excess of permanent new arrivals to country over permanent departures in 1 yr

strong eco grwoth, labour shortages prompt** gvts** to raise migration quotas, expanding aggregate supply > aggregate demand altho greater demand for housing & public services

53
Q

aus demographic trend & why

A

over past few decades AUS’ natural increase DOWNWARD trend
-families have fewer children
-couples marry later age than previous generations
-both spouses in full time work

NET MIGRATION fluctuates considerably, strongly invluenced by level of eco activity
-depressed eco activity & high unemployment, gvt reduces migration to ease pressure on labour market
-main role of growth in AUS population

overall population expected to be slower

54
Q

how does age distribution affect quality & size of workforce & causes

A

prop workers in 15-65 age group declining
-exacerbate imbalance and skill shortages

growing no. ppl in retirement
-declining birth rates & increasing life expectancy (higher health & living standards**)

55
Q

how do education patterns affect size & quaility of the workforce (most imp for quality)

A

those acquire skills through years of training & studying have higher earnings, around 2x than dropouts

AUS spending on edu > OECD average
-extent of private funding to cover edu costs

56
Q

overall demand for labour is most heavily influenced by _____ in an economy (lvl of eco activity)

A

level of eggregate demand

57
Q

increase in PRODUCTIVITY of labour witll have ____ influence on the demand for labour , accompanied by ____ aggregate demand

A

positive

rising

58
Q

change in realtive costs of capital and labour will influence demand for labour but can be overshadowed by

A

changed in lvl eco activity, of persistent declines in labour productivity & rises in relative cost of labour
-long term incentives for firms to sub labour for capital

59
Q

labour markets that require high-level skill (medical specialists) more closed than requiring lower level skills. what supply curve does this have?

A

inelastic

60
Q

nominal wage

A

pay received by employees in dollars for contribution to PP, not injusted for inflation

61
Q

real wage

A

measure of ACTUAL purchasing power of nominal wages adjusted for effects of inflation

62
Q

in most years, %^ in nominal wages is less/greater than percentage increase in general price level

A

greater than > (real wages generally rising)

63
Q

WORKPLACE/industrial relations system

A

laws, institutions & processes established to manage relationship betw employers & ees.

structure of IRS determines process of wage determination & conflict resolution in AUS labour market
-setsrules how LM operates

64
Q

relationship between employees & ers is known as

A

workplace/industrial relations

65
Q

AUS GVT historically played important role in WAGE DETERMINATION through

A

independent industrial courts & tribunals

66
Q

4 LM institutions TEIG

A

trade unions
employer associations
industrial tribunals
GVT

67
Q

trade union

A

association of workers aims to advance interests of its members by improving WAGES and WORKING CONDITIONS

68
Q

main role of unions

A

represent members interests by negotiating wage increases

BUT ALSO

present employees interest in issues in workplace eg. safety and organisational changes as company restructures

69
Q

4 types of unions O(IF)G

A

Occupational
industry-based
firm-based
general

70
Q

occupational unions

A

draw members from workers who posess certain skill set regardless of industry/firm they work

71
Q

industry based unions

A

cover workers in particular industry REGARDLESS of type of work they do

72
Q

firm based unions

A

only represent workers of 1 SPECIFIC ENTERPRISE
-very RARE

73
Q

general unions

A

cover WHOLE RANGE of workers with many DIFF SKILLS across VARIOUS industries

AUS Workers Union

74
Q

ACTU 1927

A

Australian Council of Trade Unions

national trade union voice

75
Q

roles of ACTU

A
  1. coordinate wage claims & industrial action across AUS
  2. conducting CAMPAIGNS and RESEARCH
  3. provide input to GVT POLICIES
76
Q

AUS experienced large rise/fall in union membership

A

fall

77
Q

highest lvl union membership vs lowest

A

education sector vs agriculture

78
Q

union membership among older workers is much lower/higher than younger workers

A

higher

79
Q

WIN factors that contributed to decline in union membership

A
  1. changes in WAGE DETERMINATION
  2. changes within INDUSTRIES
  3. changes in NATURE of EMPLOYMENT
80
Q

how do changes to wage determination decline union membership

A

movement away from centralised (GVT) wage determination to ENTERPRISE BARGAINING (employees vs ers) reduced influence of unions over wage outcomes

81
Q

how do changes within industries decline union membership

A

industries experienced greatest growht recetnly dont have history of high union membership
-bus & domestic services, retail trade sectors

sectors with traditionally high union membership
-manufacturing & GVT owned business SHRUNK as share of total EMPLOYMENT

82
Q

how do changes in nature of employment decline union membership

A

UM always highest among permanent full-time workers, who declined recent decades while casual & part time grown

casualisation of owrk

83
Q

EBS role of unions

A
  1. represent employee interests
  2. exercise bargaining power in negotiations with employers
  3. restrict supply of labour
84
Q

how do unions represent employee interests?

A

broader role in influencing labour market outcomes, provide collective voice for workers when management implements organisational changes
-issues affecting workers
better access to training & edu
-improve safety standards in workplace
-easier to combine work & family responsibilities

85
Q

how do unions exercise their bargaining power in negotiations with employers & what is the trade off/OC

A

employees act alone, unlikely substantial influence on employer bc limited bargaining power, easy to replace
-join together (strike), sig power diff replace entire workforce
-negotiate higher wage rate than market forces determine

BUT if strong unions convince eployers to pay higher than equilibrium wage rate, quantity labour supplied > quantity of labour demanded
-employment < og equilibrium wuantity
-excessive wage demands in 1 industry may contribute to higher lvl unemployment by pricing labour out of a job
-may face trade-off when unions bargain with employers for wage adjustments to maintain current lvls employment

86
Q

how do unions restrict the supply of labour

A

unions w/ very high membership lvls can restrict SOL to firm/industry on ONGOING basis
-increase wage rate
-restrict hiring employees –> lower supply labour + higher pay

87
Q

employer associations

although larger employers have greater financial resources than unions, employers are generally not as well coordinated. why?

A

already have greater bargaining power

many instances in direct competition w/ each other

larger employers deal with unions directly than undergoing employer association

88
Q

employer associations

A

typically operate as sector-based/general business lobby groups representing business interests on eco policy issues
-taxation
-regulations
-industrial relations

help employers manage relationships with employees & unions

89
Q

3 most important employer associations at federal level AUS

A
  1. business council of australia BCA
  2. Australian industry group AIG
  3. Australian chamber of commerce and industry
    ACCI

provide national voice for employers
-debate over labour market policy changes

90
Q

employer associations main focus

A

influencing industry/economy-wide changes

eg. FWC’s annual min wage decision

91
Q

how do employer associations benefit both employers & ees

A

lobbying the GVT for protection from:
-foreign competition
-tax exemptions
-industry assistance

to secure larger share of domestic markets for AUS producers

92
Q

4 main roles employer organisations play in the labour market

A
  1. sometimes negotiate wage agreements cover large no. members
    -but multi-employer wage negotiations limited under Fair Work Act
  2. provide ADVICE, TRAINING, DIRECT ASSISTANCE to employers
  3. LOBBYING GVT for changes to GVT POLICIES
    -esp industrial relations (FWC for min. wage change)
    -skills training
  4. represent employers’ INTERESTS in hearings in industrial tribunals
93
Q

FWC fair work commission

A

GVT national industrial relations tribunal
sets min wage, approves EAs, resolves industrial disputes, unfair dismissal, set awards
* established by Fair Work Act 2009

94
Q

how has AUS’ workplace relations framework evolved over past 3 0 years?

A

highly CENTRALISED WAGE DETERMINATION SYSTEM to one allowing more room for wage levels & work arrangements negotiated at individual firm level

allowed wages & working conditions take account specific characteristics of workplace

95
Q

what is AUS’ industrial relations system governed by?

A

Fair Work Act 2009

96
Q

what 3 main streams in the labour market established by the Fair Work system (overseen by FWC) determine the pay & conditions of employees?

A
  1. modern awards
  2. enterprise agreements
  3. common law contracts
97
Q

4 NES National Employment Standards

A
  1. MAX weekly hrs work 38 or less hrs/week + reasonable hrs of work
  2. right to request FLEXIBLE WORKING ARRANGEMENTS
    -55+, parents, disabled can request change in working arrangements
    -hrs, working from home
  3. LEAVE
    -employees right to paid annual, sick, compassionate leave + holidays
    -right to unpaid parental, community survice, long service leave
  4. CASUAL CONVERSION
    casual employees worked for employer (not small bus) 12+ months MUST offered option to convert to FULL/PART time employment
98
Q

national min wage provides safety net for employee not covered by an ___, responsible by the ___

A

award

FWC

99
Q

awards

A

establish min. wage & working conditions for employees specific to employee’s wrk/industry
rates of pay & entitlements

extend protections of NES w/ provisions tailored to needs of specific industry

-overtime & penalty rates
-annualised wage/salary arrangements
-allowances
-leave-related matters
-procedures for settling disputes

100
Q

most common method of wage determination in formal industrial relations system

A

ENTERPRISE AGREEMENTS
workplace agreement negotiated collectively through enterprise bargaining betw employer/s & ees usually represented by UNIONS

101
Q

minimum for enterprise agreements

A

must comply with NES
cannot offer pay rates BELOW equivalent AWARD

102
Q

collective (enterprise) agreements

A

cover all workers to management level in company

103
Q

what issues do collective/enterprise agreements normally cover?

A

-wage increases (declined under EA over yrs)
-loadings for additional work hrs
-travel arrangements
-other changes relevant to specific sector/occupation

104
Q

common law contracts/individual arrangements

A

not part of formal industrial relations system but comply with all minimum standards

simple agreements often used in small businesses
-add-ons to relevant awards
-cant offer pay rates & conditions below equivalent award unless offer high rates of pay above 167.5 thousand

enforced through ordinary law courts than industrial tribunals which require greater expense for employers/ees.

105
Q

short term work contract

A

contracts which workers employed by labour hire company that sells their labour hire services to another company

Economics (14 decks)

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