2.7 Labour Market Flashcards
(15 cards)
EXAM Q: benefits of labour mobility
labour market
consists of the supply of labour by households and the demand for labour by firms. The interaction of these two gives the price of labour, usually called wages (see Chapter 1.1), and the quantity supplied and demanded.
wages: what do they mean? hu influences them?
labour markets of different geographical ranges
labour markets consist of smaller, interacting labour markets for different:
● qualifi cations, i.e. some jobs have specifi c qualifi cation
requirements
● skills, i.e. others may require specifi c skills in place of or in
addition to qualifi cations
● geographical locations
labour markets depend on the exchange of information between employers and potential workers about:
● wage rates
● conditions of employment
● level of competition
● location of the job, etc
why does the labour market lack perfect mobility
● lack the skills required — for example, a train driver cannot
easily become a teacher
● are unwilling to relocate to another part of the country or
even to a different country. This can be linked to a lack of
skills — for example, a lack of a suitable foreign language will
restrict UK citizens to English-speaking countries
● have personal factors such as family ties that restrict
moving between jobs or a preference for certain types of jobs,
location, etc.
● may lack the information about the jobs available due to
information failure (see Chapter 3.8)
trade unions
Many workers belong to trade unions. A major function of a trade
union is to negotiate with employers on behalf of its members to
set the wage rate, work conditions etc. This is called collective
bargaining. In this case the wage rate may apply not just to
the firm the individual works for, but to all who work in that
occupation.
supply of labour
The supply of labour (Table 2.7.2) is usually thought of as those
who are both willing and able to supply their labour, including
the unemployed (sometimes called the working population).
There is, however, a potential additional supply of people who,
for one reason or another, are currently inactive.
active labour supply vs inactive labour supply
factors affecting Dd for labour
factors affecting Ss for labour
● Barriers to entry: these may consist of necessary qualifi cations
as in the cases of doctors, lawyers and veterinarians, where
the nature of the qualifi cations needed to work and the length
of time of training restrict the supply. They may also take the
form of trade unions and agreements with employers, and
discrimination, the lowering of which has seen more females
enter the workforce.
● Education and training: this will increase the number of skilled
workers available.
PED and PES of labour
These situations are shown in Figure 2.7.5. The supply of
CEOs is inelastic as there are only a few people with the right
qualifications and experience. The demand is also inelastic as the
employers are willing to pay a high price to get the right person.
The result is a wage of Wh, with a quantity of Qh. For the shop
assistants, the supply is elastic as a very large number of people
would be able to fulfil this role. The demand is also elastic as
employers would not want to employ as many employees if the
wage rose. The result is a wage of Wl and a quantity of Ql
gross pay
Gross pay is the amount of money that an employee actually
earns before any deductions are made. It includes overtime
payments, bonuses and allowances etc. Gross pay is that which
is normally quoted when jobs are advertised.
net pay
