A2 Labour Markets Flashcards

Question

How can firms shift the labour supply curve to the right (encourage workers to supply more hours at any level of pay)

Answer 1

By providing non-pecuniary benefits, benefits that are not fully reflected in the wage such as a subsidised canteen, use of a gym or company car. This can cause workers to consider not only the wage rate, but the overall package offered by employers when considering where to work, good for firms if the labour market is tight.

Answer 2

Upward sloping, on the whole higher wages encourage people to supply labour.

Answer 3

How sensitive workers are to a change in the wage rate e.g. the extent to which an increase in the wage rate will lead to an increase in the supply of labour,

Answer 4

The level of unemployment, this indicates how many people are ready to take up jobs. Secondly- the degree of flexibility of labour supply, there may be geographical immobility of labour or the unemployed people may not have the skills needed for the job. Labour supply tends to be more inelastic in the short term.

Answer 5

The minimum payment required to keep a factor of production in its present use, rather than it being used for an alternative activity.

Answer 6

The payment above what is necessary to keep a worker (or a factor of production in general) in its current occupation (transfer earnings)

Answer 7

If labour supply is perfectly elastic this means W is the minimum payment that all workers would need to be paid to stay in this occupation (transfer earnings) so no economic rent is made. If labour supply is perfectly inelastic there is no minimum payment that is needed to keep workers in their occupation so all payment is economic rent. The more elastic the labour supply the higher the proportion of total earnings is transfer earnings.

Answer 8

The demand side of the market must be looked at as well as it is the interaction between demand and supply that determines the equilibrium wage rates. There may be inelastic supply of an occupation but if demand for it its low its workers won't make high economic rents.

Answer 9

The stock of skills and expertise that contribute to a worker's productivity.

Answer 10

When consumers begin to demand more of a good or service (MRP shifts to the right), the wage differentials for workers producing this good increases. Once an abundance of people gaining skills in this area results in an increase o supply of such workers the wage differentials narrow. Wages should act as a signal to workers as to what skills are in demand, in an effective labour market the system guides the allocation of resources.

Answer 11

The number of people aged between 16 and 64.

Answer 12

The ratio of dependants (people aged 15 and below or over 65) to the working population.

Answer 13

This is someone who is active in the work-force, they are either employed, self-employed or unemployed.

Answer 14

People that are economically active (employed, unemployed, self-employed)

Answer 15

The ILO unemployment rate

Answer 16

The number of people who are available for work and are seeking work, but are without a job.

Answer 17

Someone who is not active in the workforce, they are not in a job and are not seeking a job. E.g. students, carers , people that are ill, if they are not of working age or they are a discouraged worker

Answer 18

The number of people in a given age group who are economically inactive e.g. if they are not of working age or they are a discouraged worker, carer of a family member.

Answer 19

The inflation rate affects the purchasing power of earnings.

Answer 20

The level of earnings adjusted for the price level.

Answer 21

Also known as nominal wage, this is the earnings paid at a point in time to workers (not adjusted for inflation)

Answer 22

Nominal earnings /inflation

Answer 23

The average wage level may have increased but this doesn't mean that every worker experienced a pay rise, the distribution is important. Some areas of work may have faster rising wages while others have decreasing (this may reflect consumer demand for the service so in declining sectors the real wage is likely to fall. The standard of living may depend on factors outside of income such as the environment people live in , their health and quality of leisure time.

Answer 24

A situation in a labour market where some people receive lower wages for reasons that can't be explained by economic factors. E.g. the gender gap and differences in wages between ethnicities and age groups.

Answer 25

The percentage pay difference between men and women's median earnings. This gap is especially significant in professional occupations.

Answer 26

The relative cost of production in different countries influence the prices they can charge influencing the relative competitiveness of UK goods in overseas and domestic markets.

Answer 27

The wages salaries and other costs of using labour divided by output per worker.

Answer 28

If unit labour costs in an economy rise more rapidly than in other countries, ceteris paribus the UK becomes less competitive.

Answer 29

A measure of output per worker or output per hour worked, effectively it is a measure of productive efficiency of labour.

Answer 30

Woorking hours vary in many countries so measuring GDP per head doesn't reflect quality of labour but quantity. There could be differences in data collection that vary the results.

Answer 31

The average producutivity of all factors this is measured as the total output divided by the total amount of input used,

Answer 32

Where the labour market can quickly adapt to changes in consumer demand and allows people to quickly move into the jobs as demand chances (wage should be a signal causing allocative efficiency)

Answer 33

It allows the economy to be adaptable so resources can be allocated efficiently and quickly. It also allows the country to be internationally competitive especially if our labour market is more flexible than our global competitors.

Answer 34

When labour markets fail to achieve the most desirable efficient allocation of resources.

Answer 35

``` The employers (as the buyers of labour) may have market power that can be exploited at the expense of workers. Or maybe the employers work against specific groups of workers relative to others through discrimination in their hiring or wage setting behaviour. ```

Answer 36

There may be restrictions on the supply of some types of labour (the working age population may not be skilled in the expanding sectors (structural unemployment)) Trade unions may be able to bid wages up to a level beyond the free market equilibrium.

Answer 37

A market in which there is a single buyer of a good, service or factor of production.

Answer 38

When workers switch between jobs - this is only a problem when the labour market is inflexible and finding a new job that matches your skills is difficult.

Answer 39

When people find themselves unemployed as they have skills in sectors that are declining rather than expanding, so they need to be retrained. This is a sign of labour market inflexibility as it slows the ability of people to move from one job to another.

Answer 40

Aggregate demand in an economy is not enough to allow full employment.

Answer 41

The free- rider problem is possible. Providing training for their workers is costly and if these skills can be used in other firms its possible that firms not providing training will poach newly trained workers without incurring the costs of training.

Answer 42

The ratio of unemployment benefits to the wage that a claimant could receive if in employment.

Answer 43

Voluntary Unemployment could occur if people choose to not work as the unemployment benefit is at a level where they are better off on benefits rather than accepting a low-paid job.

Answer 44

Where people are unemployed voluntarily as the level of benefit is high relative to the wage available in low-paid occupations.

Answer 45

If wages are set at a level above the free market equilibrium the supply of labour will exceed the quantity of labour that firms are prepared to hire and the difference between these two amounts is unemployment- the number of people that want a job at the going rate are unable to find a job.

Answer 46

If demand for a product falls and as a result a firms marginal revenue product falls (mr * mpp) it is going to demand a lower level of employment and in a free-market would pay lower wages as it is now profit maximizing to hire less workers. However, if for example there is a trade union keeping the wage level fixed, the wage can't fall so the same amount of workers will be willing to supply their labour The difference between those willing to supply themselves for labour and those that are hired is unemployment.

Answer 47

Geographical | Occupational

Answer 48

There can be a difficult faced by people when they want to move between occupations.

Answer 49

Workers can not freely move to different regions of the country where there are jobs that their skills are well suited for, so they remain in an area that does not have the appropriate jobs for them.

Answer 50

There may be social considerations e.g. will the area have good schools for their children, family ties

Answer 51

Economic terms e.g. High house prices in another area relative to valuation of current house means it'd be hard to find a house of a similar standard in a new region. Council house tenants may be worried that they'll be unable to quickly get a new house as they'll be placed on a long waiting list.

Answer 52

People may not be aware of the different jobs that are available in different parts of the country. Although the internet helps this problem, it is still easier for locals to find jobs in their area

Answer 53

As time goes on, naturally, consumer demand patterns change and in response certain sectors in the economy decline to allow others to expand. The UK has moved from manufacturing to service sector activities and people in manufacturing jobs need to be occupationally mobile in order for them to make sure that they remain unemployed.

Answer 54

They do not have the skills that are required for the available jobs so they need retraining. Information may play a factor as workers may not be informed to the extent where they can judge the benefits of occupational mobility. They may not be aware of the job satisfaction that they can gain from a job that they haven't tried. For many steel workers their occupation runs through their family and is all they know so they at very against gaining a ew job.

Answer 55

Legislation that prohibits firms from paying their workers below a certain amount, set by the government. The NMW was set in 1997

Answer 56

To protect workers from exploitation from bad employers that want to pay workers an unacceptable amount. To incentivize the unemployed into finding a job as it means that 'work pays' so voluntary unemployment is less likely. To alleviate poverty and raise the standards of living of the poorest.

Answer 57

It doesn't protect workers from being exploited by bad bosses as there are ways around paying it. Workers could be paid on a piece rate meaning there is no wage set per hour. Some may argue that the minimum wage is too indiscriminate to alleviate poverty- it does nothing to help the homeless that can't get a job. Some argue that the NMW causes greater unemployment because it increases the demand for labour, but not supply, thus causing a disequilibrim in the market. There are many sub-markets across the UK so one minimum wage is too general and will impact different markets to a greater extent.

Answer 58

People that were previously employed will be made unemployed as it is not profitable to hire them any more. The hire wage incentivizes more people to work for the firm meaning there are additional workers who are willing to accept work at the going wage rate.

Answer 59

If the floor is set below the free- market equilibrium (non - binding minimum wage). In a monopsony, where there is only one buyer of labour the firm may reduce wages to a point below the competitive equilibrium position (where demand=supply) and reduce employment. Raising minimum wage above the equilibrium to a point where wage is equal to marginal revenue product increases employment and takes the market into a perfectly competitive position.

Answer 60

It is an estimate on the amount of income needed by households to afford an acceptable standard of living. It is £9.75 in London and £8.45 in other parts of the UK (somewhat more discriminative and acknowledges the different cost of living in areas).

Answer 61

It would reduce the massive wage differential between the highest earners and very lowest.

Answer 62

High wages are seen as an incentive for people to work hard and progress

Answer 63

The wage effect argues that workers will supply less labour as wages increase meaning the incentive to work is not as strong.

Answer 64

It was a set of regulations to improve health and safety by regulating the amount of hours employees were allowed to work and set minimum requirements for amount of annual leave.

Answer 65

It meant that rather than paying workers to work more hours, if firms wanted to increase labour input they had to hire more workers, since there are fixed hiring costs this raises the cost of labour.

Answer 66

A negotiation of workers that negotiate with employers on behalf of its members.

Answer 67

Wage bargaining Improving work conditions Ensuring the security of employment (can't be fired for no legitimate reason) for their members

Answer 68

It is a way that trade unions can restrict labour supply as firms are only allowed to employ those that are members of a union. The union has the power to decide who can become registered members and therefore who is eligible to work for the firm.

Answer 69

Although higher wages benefit the worker this is means a greater cost is incurred to the employer and reduces the employment level. Essentially a trade-off is created between unemployment and higher wages.

Answer 70

The extent to which wages are driven up depends on the elasticity of demand for labour. If demand for labour is very elastic to the wage rate a restriction of labour supply to a fixed point will raise wages by a small degree but if there is inelastic demand it will rise by a large amount.

Answer 71

In a firm where labour can easily be substituted for capital. Where labour takes up a large proportion of the firms total costs Where demand for the good the firms good is very elastic.

Answer 72

Unemployment is likely as there is an extension in the supply of labour as more people are willing to offer their labour at a higher wage rate. Unemployment also occurs as at the higher rate some people lose their jobs as the cost of labour has increased.

Answer 73

This is dependant on the wage elasticity of demand. If demand is inelastic unemployment will increase by a small degree.

Answer 74

It means wages can't be used as signals for patterns of consumer demand to firms which could lead to a misallocation of resources (allocative inefficiency).

Answer 75

Trade unions could provide job opportunity for employees which could result in them being more productive as they feel more secure in their job.

Answer 76

Economic activity that is not registered or recorded, this means taxes and regulations (e.g. health and safety, social protection) are avoided. They are more likely to be in service sector jobs rather than manufacturing e.g. car-washing

Answer 77

It is less significant than in most other advanced economies at 10-13% of GDP

Answer 78

Offer relocation subsidies to firms that move to an area where labour is plentiful. Subsidise transport so its easier for people to commute a further distance. Increase the supply of houses in an area with above average house prices where labour is plentiful in order for house prices to fall so more people can afford to move here.

Answer 79

Subsidise (grants) or tax relief firms that offer training schemes to those with insufficient skills. Invest in education that is necessary for the expanding sectors of the economy.

Answer 80

If the training process is used to decide which candidates to hire the employer is enabled to choose the best worker as they can see their potential better than what is enabled through an interview.

Answer 81

This is a cost to the government and an opportunity cost is incurred, the money used to subsidise the firm could have been used to improve education.

Answer 82

The government can weaken the power of trade unions to limit their ability to trade of high wages with lower employment levels. In the 1980s it became law that secret ballots had to be used to decide whether strike action could be taken. This limited the ability of trade unions to disrupt firms through strike action.

Answer 83

When some workers are paid more as they have a higher productivity level, it is not justified if it is due to discrimination or trade unions in fact it is a form of market failure.

Answer 84

The flow of wages and other earnings in a period

Answer 85

The stock of accumulated assets

Answer 86

The degree to which income earned by workers is spread unevenly in a country

Answer 87

The unequal distribution of assets in a population.

A2 Labour Markets Flashcards

(111 cards)