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A Labour Mkts 2u Flashcards

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1
Q

What is derived demand in the context of labour?

A

Demand for labour is linked to the demand for final goods/services

Derived demand indicates that the need for labour arises from the demand for the products that labour helps to produce.

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2
Q

What is the relationship between demand for labour and the market wage rate?

A

There is usually an inverse relationship; as wage rates increase, demand for labour decreases

This relationship suggests that higher wages make hiring more expensive for businesses.

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3
Q

What happens to the demand for labour when wages decrease?

A

Firms will demand more labour at lower wages

This is illustrated by the downward-sloping labour demand curve.

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4
Q

List factors that can increase firms’ demand for labour.

A
  • If demand for their output increases
  • If workers are more productive (higher MRP)
  • If the price of substitute resources increases
  • If the price of the product that labour is making increases
  • If an employment subsidy cuts labour costs

These factors can also be reversed to explain a decrease in labour demand.

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5
Q

What is wage elasticity of demand (WED)?

A

The responsiveness of quantity of labour demanded to a change in the wage

WED is calculated as % change in quantity of labour demanded divided by % change in wage.

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6
Q

What factors does wage elasticity of demand depend on?

A
  • What % of total costs are labour costs
  • The ease and cost of factor substitution
  • The price elasticity of demand (PED) of the final product
  • The time period

These factors influence how sensitive the demand for labour is to changes in wage rates.

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7
Q

Define marginal revenue product of labour (MRPL).

A

The extra revenue generated when an additional worker is employed

MRPL is calculated as marginal product of labour multiplied by marginal revenue.

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8
Q

What does the MRPL curve represent?

A

The demand curve for labour

The MRPL curve indicates the level of employment that maximizes profit for firms.

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9
Q

What is the condition for a profit-maximizing firm regarding employment?

A

Employ workers up to the point where MRPL = marginal cost of labour

At this point, the wage equals the marginal cost of labour.

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10
Q

What are limitations of the MRPL concept?

A
  • Difficult to measure productivity for many jobs
  • Labour productivity can depend on other inputs
  • Collaborative work makes individual productivity hard to determine
  • Some workers set their own pay

These limitations can affect the accuracy of MRPL as a measure of labour demand.

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11
Q

What is derived demand in the context of labour?

A

Demand for labour is linked to the demand for final goods/services

Derived demand indicates that the need for labour arises from the demand for the products that labour helps to produce.

How well did you know this?
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12
Q

What is the relationship between demand for labour and the market wage rate?

A

There is usually an inverse relationship; as wage rates increase, demand for labour decreases

This relationship suggests that higher wages make hiring more expensive for businesses.

How well did you know this?
1
Not at all
2
3
4
5
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13
Q

What happens to the demand for labour when wages decrease?

A

Firms will demand more labour at lower wages

This is illustrated by the downward-sloping labour demand curve.

How well did you know this?
1
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14
Q

List factors that can increase firms’ demand for labour.

A
  • If demand for their output increases
  • If workers are more productive (higher MRP)
  • If the price of substitute resources increases
  • If the price of the product that labour is making increases
  • If an employment subsidy cuts labour costs

These factors can also be reversed to explain a decrease in labour demand.

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15
Q

What is wage elasticity of demand (WED)?

A

The responsiveness of quantity of labour demanded to a change in the wage

WED is calculated as % change in quantity of labour demanded divided by % change in wage.

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16
Q

What factors does wage elasticity of demand depend on?

A
  • What % of total costs are labour costs
  • The ease and cost of factor substitution
  • The price elasticity of demand (PED) of the final product
  • The time period

These factors influence how sensitive the demand for labour is to changes in wage rates.

How well did you know this?
1
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17
Q

Define marginal revenue product of labour (MRPL).

A

The extra revenue generated when an additional worker is employed

MRPL is calculated as marginal product of labour multiplied by marginal revenue.

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18
Q

What does the MRPL curve represent?

A

The demand curve for labour

The MRPL curve indicates the level of employment that maximizes profit for firms.

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19
Q

What is the condition for a profit-maximizing firm regarding employment?

A

Employ workers up to the point where MRPL = marginal cost of labour

At this point, the wage equals the marginal cost of labour.

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20
Q

What are limitations of the MRPL concept?

A
  • Difficult to measure productivity for many jobs
  • Labour productivity can depend on other inputs
  • Collaborative work makes individual productivity hard to determine
  • Some workers set their own pay

These limitations can affect the accuracy of MRPL as a measure of labour demand.

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21
Q

What does the labour supply curve represent?

A

The relationship between the wage rate and the number of workers willing to work in a particular occupation.

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22
Q

How does the supply of labour change with wage rates?

A

The supply of labour is greater at higher wages than lower wages.

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23
Q

What is the reservation wage?

A

The lowest pay rate at which people are willing to work in an occupation.

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24
Q

What factors influence the supply of labour to a particular occupation?

A
  • Monetary rewards
  • Non-monetary rewards
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25
What are examples of non-monetary rewards?
* Job satisfaction * Working conditions * Holiday entitlement * Status * Working hours
26
Define occupational immobility.
When there are barriers to people being able to switch between one job and another.
27
What causes occupational immobility?
* Skills gaps * Training gaps * Experience gaps * Confidence * Motivation
28
Define geographical immobility.
When there are barriers to people being able to move to a new location for work.
29
What causes geographical immobility?
* Housing and living costs * Family/social ties * Lack of transportation
30
How can labour immobility affect the supply of labour?
It can reduce the supply of labour to some occupations.
31
How is wage determined in competitive markets?
By the interaction of labour demand and labour supply.
32
What happens when there is a shift in labour demand or supply?
The market will adjust to the new equilibrium wage and employment.
33
List some factors that can cause shifts in labour supply.
* Changes in non-monetary/non-pecuniary benefits of work * Changes in working conditions * Changes in taxation and welfare benefits * Changes in the wages of different occupations * Occupational and geographical mobility of labour * Net immigration
34
What is wage elasticity of supply?
The responsiveness of the quantity of labour supplied to a change in the wage.
35
How is wage elasticity of supply calculated?
WES = % change in Q of labour supplied / % change in wage.
36
What factors does wage elasticity of supply depend on?
* Nature of skills and qualifications required * Vocational nature of work * Time period * Occupational and geographical mobility of labour
37
What occurs when labour supply shifts right from S1 to S2?
There is an excess supply at the original wage, leading to a decrease in wage and an increase in employment until a new equilibrium is reached.
38
What happens when labour demand shifts right from DL1 to DL2?
There is an excess demand at the original wage, causing the wage to rise and an extension in labour supply until a new equilibrium is reached.
39
What is a monopsony?
A market structure where there is only one major buyer or employer in a labor market, such as the NHS or local governments. ## Footnote Monopsony can lead to lower wages due to limited alternatives for workers.
40
How does a monopsonist determine wages?
The marginal cost of labor (MC) exceeds the average costs of labor (AC). ## Footnote This means that to employ one more worker, the employer must increase wages for all employees to attract new workers.
41
What is the profit-maximizing employment level in a monopsony?
The level where marginal cost of labor (MC) equals marginal revenue product of labor (MRP). ## Footnote This is represented by the quantity of labor L1.
42
What wage does a monopsonist pay to attract workers?
The monopsonist pays W1, even though the marginal revenue product (MRP) is higher. ## Footnote This indicates exploitation of workers as they are paid less than the value they add.
43
What is the impact of monopsony on wages and employment compared to a perfectly competitive labor market?
Monopsony employs fewer workers at a lower wage (W1 vs W2). ## Footnote In a perfectly competitive market, equilibrium wage and employment would be higher (W2 at L2).
44
What are the negative effects of monopsony on employees?
* Lower wages leading to reduced standard of living * Reduced employment causing higher unemployment or underemployment * Diminished job quality with suboptimal working conditions * Economic inequality concentrating bargaining power with employers ## Footnote These factors can negatively impact the well-being and job satisfaction of workers.
45
Fill in the blank: In a monopsony, the employer has the power to pay a wage rate of _______.
W1
46
True or False: Monopsony power can lead to increased job security for workers.
False ## Footnote Monopsonistic employers may provide fewer benefits and less job security.
47
What is the relationship between marginal cost of labor (MC) and average costs (AC) in a monopsony?
MC exceeds AC. ## Footnote This creates a situation where employers have to adjust wages to attract workers.
48
What is the National Minimum Wage (NMW)?
A legally imposed price floor in labour markets ## Footnote It must be above the market equilibrium to have an impact.
49
What happens to employment when the NMW is introduced?
Employment may fall due to a decrease in demand for labor ## Footnote Initially, the wage rate rises but demand for labor falls.
50
What is the impact of the NMW on the labor supply?
It attracts more workers into the labor market ## Footnote This results in an extension along the labor supply.
51
List some benefits of the National Minimum Wage.
* Fairer pay * Less discrimination * Less poverty * Less worker exploitation * Helps reduce income inequality * Incentivizes more workers to search for work * Lower costs of welfare for government
52
Under what circumstances may the NMW not cause unemployment?
If the economy is growing, better pay boosts productivity, or it increases spending by lower-paid workers ## Footnote Higher Aggregate Demand (AD) increases the demand for labor.
53
What are some costs associated with the NMW?
* May cause real wage unemployment * Only covers employees; self-employed may be paid less * Increases costs to businesses * Could become inflationary * Less international competitiveness * Does not tackle many aspects of poverty reduction
54
What is the profit-maximizing employment level for a monopsony?
Where Marginal Cost (MC) equals Marginal Revenue Product (MRP) ## Footnote The number of people employed is denoted as L1.
55
What happens to the labor supply curve after the introduction of the NMW in a monopsony?
It becomes perfectly elastic at the NMW until it hits the labor demand curve ## Footnote After this point, it reverts to the pre-NMW conditions.
56
What occurs to wages and employment when a minimum wage is set between W1 and NMW?
Wages will increase, but employment will fall back towards L1 ## Footnote This is due to the disjointed nature of the employment levels.
57
What is the effect of setting the minimum wage above W3?
Wages will rise, but employment will fall ## Footnote This indicates a negative impact on employment levels.
58
What is the relationship between marginal cost and average cost in a monopsony before the NMW?
MC is the same as AC up to L1 workers ## Footnote All workers are paid the same wage, which is the NMW.
59
What is a wage differential?
The difference in wages between workers with different skills in the same industry, or between workers with comparable skills in different industries or localities.
60
What are compensating wage differentials?
A reward for risk-taking, working in poor conditions and during unsocial hours.
61
What do differentials compensate workers for?
Opportunity and direct costs of human capital acquisition.
62
Why might some workers earn higher pay?
Due to differences in labour productivity and revenue creation.
63
How do trade unions influence wages?
By using collective bargaining power to achieve a mark-up on wages compared to non-union members.
64
What are artificial barriers to labour supply?
Examples include professional exams and migration.
65
What is a pay gap?
The difference in earnings between different groups of people, e.g., women, ethnic minorities earning less.
66
Define the gender pay gap.
The difference between average hourly earnings of men and women as a proportion of average hourly earnings of men's earnings.
67
What is the ethnic pay gap?
Disparities in income based on factors such as race and ethnicity.
68
What is the disability pay gap?
Differences in earnings between individuals with disabilities and those without disabilities.
69
What types of discrimination can affect wages?
Discrimination based on gender, race, age, sexual orientation, and socioeconomic groups.
70
What is employer discrimination?
Employers may perceive older workers as less able to learn new tasks, less flexible, and less ambitious, leading to lower wages.
71
What factors cause pay gaps?
* Occupational segregation * Educational and occupational choices * Work experience and seniority * Negotiation and salary transparency * Unconscious bias * Parental and caregiving responsibilities * Lack of workplace flexibility and inclusion.
72
What does the demand curve without discrimination represent?
The labour demand curve (DL) where the wage is W.
73
What happens to wages with discrimination?
Employers assume the group is less productive, reducing the demand and the wages to W*.
74
Fill in the blank: A wage differential is the difference in wages between workers with different _______.
[skills]
75
True or False: The gender pay gap is calculated including overtime earnings.
False
76
What is a trade union?
An organised group of employees who work together to represent and protect the rights of workers, usually by using collective bargaining techniques.
77
What are the main aims of trade unions?
* Gain better wages * Protect jobs * Improve non-monetary aspects of jobs (e.g., pension rights) * Protect against unfair dismissal * Ensure health and safety at work * Counterbalance monopsony power
78
What happens if a trade union gains a wage above the market equilibrium?
The wage for its members rises to WTU, but it may cause some real wage unemployment of Q2Q3.
79
What is the trade union wage premium?
The gap between wages of trade union members and non-members.
80
What factors make it easier for a trade union to gain a pay increase with no job loss?
* Labour is a small percentage of total costs * Difficult to substitute labour with other factors of production * Demand for the final product is inelastic and/or increasing * Trade unions control the supply of labour (closed shops) * Firm is already making substantial profits * Pay claim is accompanied by a productivity rise
81
What factors influence trade union power?
* Macroeconomic climate * Public support and sympathy * Union density * TU legislation
82
What are arguments for trade unions?
* Better wages and working conditions * Trade union wage premium = higher wages * Lower wage inequality * Ensure real wages are not eroded * Counterbalances monopsony power of employers * Can improve industrial relations
83
What are arguments against trade unions?
* Reduces employment flexibility * Prevents efficient working of labour markets * Adds to business costs if wages are higher with no improvement in productivity * Reduces profits of companies * Can delay introduction of new technology
84
How do monopsony employers and trade unions interact?
A trade union can push wages AND employment up in a monopsony labour market, making it more competitive.
85
What is the zone of bargaining for trade unions in a monopsony?
The wage that lies between W1 and W3, where a trade union can negotiate to increase wages without a fall in employment.
86
What role can trade unions and the NMW play in relation to monopsony power?
They can counterbalance monopsony power and achieve fairer pay and less exploitation of workers.
87
True or False: Trade unions always lead to increased employment.
False.
88
Fill in the blank: Trade unions aim to counterbalance _______ power of employers.
monopsony
89
What are the four characteristics of a competitive labour market?
Perfect Information, Homogeneous Labour, Mobility of Labour, No Monopsony Power
90
How are wages determined in a competitive labour market?
By the interaction of demand and supply
91
What is a monopsony employer?
An employer that is the sole buyer of labour in a market
92
List three reasons why most labour markets are not competitive.
* Monopsony employer * Barriers to entry * Information asymmetry between employer and workers
93
What does geographical mobility refer to?
The ability of labour to move around an area, region, or country to work
94
Name two policies to improve geographical mobility.
* Regional policy * Investment in transport infrastructure
95
What is occupational mobility?
The ability of labour to switch between different occupations
96
What factors affect occupational mobility?
Level of transferable skills and educational requirements of jobs
97
List two policies to improve occupational mobility.
* More & better education and training * Investment in schools and universities
98
What are some policies to reduce discrimination in the labour market?
* Enforce and strengthen anti-discrimination laws * Affirmative Action / Diversity Initiatives by employers
99
Define the gig economy.
Businesses that operate digital platforms/apps allowing individuals to undertake jobs, or 'gigs', for end-users
100
What has contributed to the growth of the gig economy?
The rise of technology and increased demand for flexible work arrangements
101
What are two benefits of the gig economy for employers?
* Offer lower wages * Reduce costs
102
What are two drawbacks of the gig economy for workers?
* Less employment protection * Lack of job security
103
What is labour migration?
Cross-border migration of people from one country to another
104
What is the difference between immigration and emigration?
Immigration is people entering a country; emigration is people leaving a country
105
List three benefits of net immigration.
* More skilled workers & higher productivity * Increase in labour supply * Positive multiplier effects
106
What are two costs of net immigration?
* Welfare costs and greater demand for public services * Possible displacement of some domestic workers
107
Fill in the blank: The gig economy offers workers more flexible hours, but there is less _______.
employment protection

econ max (33 decks)

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