3.5 Labour Markets

Question 1

What does the demand curve for labour show?

Answer 1

The quantity of labour that employers wish to hire at each possible wage rate.

Question 2

What is derived demand in the context of labour?

Answer 2

The demand for labour that arises from the demand for the product the labour produces.

Question 3

Name a factor influencing demand for labour related to wage rates.

Answer 3

As wage rates increase, demand for labour contracts.

Question 4

How does demand for the product influence the demand for labour?

Answer 4

If there is no demand for the product, there is no demand for the labour.

Question 5

What effect do prices of other factors of production have on demand for labour?

Answer 5

If machinery and equipment become cheap, demand for labour will fall.

Question 6

How do wages in other countries affect demand for labour?

Answer 6

If wages are lower in other countries, demand for labour in the UK may be low.

Question 7

What role does technology play in the demand for labour?

Answer 7

Improvements in technology can lead to job losses, reducing demand for labour.

Question 8

What is the price elasticity of demand for labour?

Answer 8

The responsiveness of the quantity demanded of labour to the wage rate.

Question 9

How does the elasticity of demand for the product affect the price elasticity of demand for labour?

Answer 9

If the good is elastic, a rise in wages will have a large impact on the quantity sold.

Question 10

What is the shape of the supply of labour curve for an individual?

Answer 10

A backward bending curve.

Question 11

How does population and distribution of age influence supply of labour?

Answer 11

A high population with many people of working age means a larger supply of labour.

Question 12

What non-monetary benefits can increase the supply of labour?

Answer 12

• High job satisfaction * Good social life * Proximity to family * Flexible hours

Question 13

How does education and training affect the supply of labour?

Answer 13

More educated workers lead to a higher supply of workers.

Question 14

What is occupational immobility?

Answer 14

Difficulty in moving from one job to another due to a lack of transferable skills.

Question 15

What is geographical immobility?

Answer 15

Difficulty in moving from one place to another due to costs, family, or housing issues.

Question 16

What is market failure in the labour market?

Answer 16

The labour market does not operate as a perfectly free market.

Question 17

What factors affect the elasticity of supply of labour?

Answer 17

• Level of qualifications * Availability of suitable labour in other industries * Time

Question 18

What determines wage rates in a perfectly competitive labour market?

Answer 18

Wages are determined purely by demand and supply.

Question 19

What is a monopsony in the labour market?

Answer 19

A market with only one buyer of labour.

Question 20

How do trade unions operate in the labour market?

Answer 20

They protect workers’ rights and pay through collective bargaining.

Question 21

What is bilateral monopoly?

Answer 21

A situation where there is both monopoly and monopsony in the labour market.

Question 22

What current issue in the labour market is related to skills shortages?

Answer 22

Geographical and occupational immobility leading to mismatched supply and demand.

Question 23

How does youth unemployment affect lifetime earnings?

Answer 23

Workers who enter the workforce during recessions tend to have lower lifetime earnings.

Question 24

What impact does rising life expectancy have on the government budget?

Answer 24

It results in increased welfare spending on pensions.

Question 25

Fill in the blank: The demand for labour is _______ as it is derived from demand for the product.

Answer 25

derived demand

Question 26

True or False: An increase in demand for a product will decrease the demand for labour.

Answer 26

False

Question 27

What is a major issue during hard economic times regarding unemployment?

Answer 27

Firms are unlikely to employ new workers and are reluctant to let go of current workers, making it difficult for young people to find jobs.

Question 28

How has rising life expectancy and the aging population affected government budgets?

Answer 28

Pensioners make up over 50% of welfare spending, leading to increased pressure on government budgets.

Question 29

What is the impact of wage inequality over time?

Answer 29

Those on the highest wages have seen larger percentage increases compared to those on the lowest wages, raising concerns about relative poverty and redistribution.

Question 30

What are zero-hour contracts?

Answer 30

Contracts that do not guarantee a minimum number of hours of work, leading to uncertainty about weekly earnings for employees.

Question 31

What is the 'Gig economy'?

Answer 31

A labor market characterized by short-term contracts and freelance work, often with companies like Uber and Deliveroo, raising concerns over worker rights and pay stability.

Question 32

How does migration affect wages and employment?

Answer 32

While migration may cause a fall in wages, it also allows employers to recruit from a larger pool of workers and helps fill skills shortages.

Question 33

What was the purpose of introducing the National Minimum Wage in April 1999?

Answer 33

To raise people out of poverty and establish decent minimum standards in the workplace.

Question 34

What are the arguments for the national minimum wage?

Answer 34

* Reduces poverty by impacting lowest wages * Decreases male/female wage differentials * Increases employee loyalty and decreases turnover * May lead to a more content and motivated workforce * Provides an incentive to work and prevents the unemployment trap * Ensures fair wages and prevents exploitation

Question 35

What are the arguments against the national minimum wage?

Answer 35

* Potential job loss in the industry * Increased costs for companies, leading to higher prices and reduced profits * Wage spiral effect due to expectations of wage increases * Lack of consideration for regional differences * May be ineffective at reducing poverty for secondary earners

Question 36

What determines the impact of a minimum wage?

Answer 36

The level of job losses depends on the elasticity of supply and demand.

Question 37

What are maximum wages?

Answer 37

Limits on the highest wages, often suggested for chief executives to reduce inequality.

Question 38

What could be a consequence of introducing maximum wages?

Answer 38

Excess demand within the industry as potential candidates may not apply if salaries do not match job responsibilities.

Question 39

What is the public sector wage setting situation in the UK?

Answer 39

The government can make wage decisions due to weak trade unions, with public sector wages potentially lagging behind private sector wages in the short run.

Question 40

What methods can the government use to improve geographical mobility of labor?

Answer 40

* Improve housing supply and reduce prices * Enhance transport links * Use national advertising for job awareness * Introduce subsidies in areas with labor shortages * Move public agencies out of high-demand areas

Question 41

How can occupational mobility of labor be improved?

Answer 41

* Increase vocational training * Encourage further education and training * Support in-work training * Focus education on skills shortages and job application assistance

Question 42

What is one way to promote flexible work patterns?

Answer 42

Encourage arrangements that allow more parents to work.

Question 43

What can be done to reduce discrimination in the labor market?

Answer 43

Subsidize employers who hire unemployed individuals from groups with above-average unemployment rates.