Unit 3: Labour Markets Flashcards
What is Derived Demand?
Demand from one thing comes from demand of another thing
Labour is derived demand; e.g. Restaurants + Chefs
Who Supplies/ Demands for Labour?
Businesses demand labour
Workers supply labour
What Factors affect demand for labour?
Technology/Machinery (as a substitute)
Gov. Regulations (e.g. min wage, laws, ease to hire, etc.)
Demand for Final Product
What Factors affect supply of labour?
Social Trends (more supply for certain sectors, etc)
Retirement Age
Availability of Benefits
Income Tax
What is Wage Elasticity of Labour Demand?
A measurement of responsiveness of demand of labour when wages change
What factors affect wage elasticity of labour demand?
Proportion of Labour Costs to Total Cost
Ease + Cost of Substitutes
PED for Product Being Made
Time Period to Look for Alternatives
Why is the Labour Market a Market Failure?
30 million are in the UK workforce, and 2.5 million are unemployed
If resources were allocated efficiently, everyone would be employed
What is Geographical Immobility of Labour?
Geographical immobility refers to barriers people moving from one area to another to find work.
What are the reasons for geographical immobility?
Family + Social Ties
Lack of Employment Info
Costs (esp. into London)
How can Geographical Immobility of Labour be Corrected?
Reforms to Housing Market: improve supply and reduce cost of rented properties
Specific subsidies for people moving into areas with labour shortages
Encourage part ownership
What is Occupational Immobility of labour?
Occupational immobility occurs when there are barriers to the mobility of factors of production between different sectors of the economy; leading to these factors remaining unemployed, or being used in ways that are not efficient.
What are the reasons for Occupational Immobility?
Structural Unemployment
mismatch of employees’ skills, and employers skill requirements
How can Occupational Immobility be corrected?
More spending on Higher Education
Subsidise provision of Vocational Training
Invest in Training Schemes for the Unemployed to boost human capital
