Labour Market (THEME 3) Flashcards
What is the demand for labour?
Demand for labour is the quantity of workers an employer is willing and able to hire at a given wage rate.
(Remember that labour is a derived demand so they only demand them for the goods and services that they can produce.)
What factors influence the demand of labour?
-The final consumer demand for a product
-The change in the final price of a good or service
-Government subsidy which can increase the amount of workers employed
-The increase in relative productivity of labour which will allow for MRPL to increase
-Chnage in capital cost changes meaning that machinery can be exchanged for labour.
What is the MRPL FORMULA?
marginal revenue(price) X marginal physical product
What are the factors that influence ELASTICITY OF DEMAND FOR LABOUR?
-% of total costs associated with the labour costs (HIGH THEN WAGE ELASTIC)
-The ped of final product
(If the PED of product is elastic this means that elasticity of demand for labour is elastic as firms are not able to pass down the cost to consumers from higher wages)
-Factor substitution and the ability to swap labour for capital machinery
(If its easy to substitue then it would be elastic as a chnage in wage rate will affect demand of labour easier)
-Time (SR=inelatic LR=elastic)
What is the definition of Supply of labour?
-the amount of hours that workers are willing and able to provide(supply) at a given wage rate.
Factors that Shift the Supply of labour?
-Unemployement rate
-Non monetary benefit
-Wage rate
-Relative pay
-Low barriers to entry into the job
-Net inward migration
-Brain drain
-Discrimination
Factors influencing Elasticity of Supply of Labour?
-Time (SR=Inelastic)
-Vocation (Hard=elastic)
-Nature of skills required for a job (Alot=elastic)
-The relative training programs needed for a job. (Alot-Elastic)
-Mobility of Labour (Mobile=Elastic)
What are some non wage factors?
-Job risk
-Anti-social hours
-occupational pensions
-Vocation
-Quality of facilities
-Working overseas
BACKWARD BENDING SUPPLY CURVE
What is the substitution effect?
The substitution effect states that the higher the wage gained by the worker the higher the opportunity cost of leisure will be.
What is the positive Income effect?
The positive income effect is the more wages rises the more workers will want to work in order to meet their target income.
What is the negative substitution effect?
Once target income is met this will cause people to spend more time on leisure rather than income.
What is Elasticity of Supply for labour?
The responsiveness of quantity supplied of labour to a change in the wage rate.
What is labour market failure?
Is a missalloction of resources by the market mechanism in the labour market.
Causes of Labour Market failure?
-Labour immobilty
(occupational and geographical)
-Discincentives to work
(Unemployement and poverty trap)
-Monopsony power and being able to dictate wages.
-Discirimination by employees and the gender pay gap.
-Executive earnings promotes to wage inequality due to excessive earnings.
Policies to correct labour market failure by the government?
-Less regulation for planning permissions on housing (GEOGRAPHICAL)
-Government subsidy in housing markets and allowing for more houses to be built.(GEOGRAPHICAL)
-Price caps on renting (GEO)
-Better funding for workplace training (OCCUPATIONAL)
-Teaching new skills
-An expansion of apprenticeships
-Higher minimum wages boosting incentives
-Reduction in income tax and national insurance contribution
-Welfare reforms
-Tougher laws on equalities and penalties
-Laws on unfair dissmissal minimum wage
(DISCRIMINATION)
