25 The interaction of labour markets

Question 1

Wage differentials

Answer 1

• difference in revenue creation of different workers
• difference in level of skills and qualifications
• difference in labour productivity
• difference in conditions of work

Question 2

Impact of trade union on labour markets

Answer 2

Can lead to market failure and the strength of trade union can lead to market failure
-likelihoods of a strong trade union leading to market failure depends upon relative strength of the firm

Question 3

Trade union

Answer 3

Collection of workers usually in the same or similar industry that collectively bargains for the workforce on issues like fairness of pay, working conditions and benefits

Question 4

Monopsony

Answer 4

A single or dominant buyer of a product

Question 5

Impact of a monopsonist employer on labour market

Answer 5

• a monopsonist employer can choose either the wage paid or the quantity of labour employed
• if profit maximising it will operate so MC=MR
• will operate at wage level and quantity of labour lower than the market

Question 6

Bilateral monopoly

Answer 6

Labour market that includes a trade union and a monopsony employer
- pressure of trade union to increase wages is balanced by the pressure of the monopsonist employer to decrease wages

Question 7

Labour market flexibility

Answer 7

Ability of workers to move between occupations and industries in order to respond to changes on wages and conditions of work

Question 8

Mobility of Labour

Answer 8

Ability or workers to move geographically in order to respond to changes in wages or conditions of work

Question 9

Government methods for increasing labour market flexibility and mobility

Answer 9

• education
• vocational education
• job training schemes
• infrastructure
• trade union reform
• technology
• legislation - (zero-hour contracts and redundancy laws)