3.5 Labour markets Flashcards
(31 cards)
What is the labour market?
A factor market where the supply of labour is determined by employees and the demand is from employers.
What is derived demand in relation to labour?
The demand for labour that comes from the demand for the products it produces.
How does productivity affect the demand for labour?
Higher productivity of labour increases the demand for workers.
What is the relationship between wage rate and demand for labour?
The downward sloping demand curve shows an inverse relationship between wages and number of workers employed.
What happens when wages increase?
Firms might switch production to capital, which can be cheaper and more productive than labour.
What factors affect the demand for labour?
- Wage rate
- Demand for products
- Productivity of labour
- Substitutes for labour
- Profitability of the firm
- Number of firms in the market
What factors influence the supply of labour?
- Wage rate
- Demographics of the population
- Migration
- Advantages of work
- Leisure time
- Trade unions
- Taxes and benefits
- Training
How does demographics / population affect the supply of labour?
An increase in the population willing and able to work raises the supply of labour.
What impact does migration have on the supply of labour?
Increases supply of labour, especially at lower wage rates and working ages.
What are non-monetary advantages of work?
Benefits like childcare affordability, holiday entitlements, and promotion potential.
What role do trade unions play in the labour market?
They can attract workers by defending employment rights but may also limit workers’ actions.
How do taxes and benefits affect the labour market?
High taxes and generous benefits might discourage participation in the labour market.
What is geographical immobility?
Obstacles preventing labour from moving between areas, such as family ties or high living costs.
What is occupational immobility?
Obstacles preventing labour from changing occupations, often due to lack of transferable skills.
True or False: The elasticity of demand for labour is linked to the price elasticity of the product.
True
Fill in the blank: The higher the demand for products, the _______ the demand for labour.
higher
Who determines the supply of labour in the labour market?
Those who want to be employed (the employees)
The supply of labour is based on individuals seeking employment.
Who determines the demand for labour in the labour market?
Employers
The demand for labour comes from those who require workers.
What is meant by ‘sticky wages’?
Wages do not adjust to changes in demand
This concept was coined by Keynes.
What effect does a minimum wage have on wages during a recession?
It makes wages sticky, leading to potential layoffs instead of wage reductions
Minimum wage laws can prevent wages from falling.
What are wage differentials?
Differences in pay for the same job due to various factors
Factors include education, skills, and discrimination.
What is a significant factor contributing to the wage gap between skilled and unskilled workers?
Technological change and globalisation
These forces have shifted production and increased demand for skilled labor.
What impact does migration have on the labour market?
Increases competition for jobs and brings high-quality skills
Migrants can enhance productivity and competitiveness.
What is the UK government’s target unemployment rate?
Around 3%
This is to account for frictional unemployment.
