Labor Markets Flashcards
(25 cards)
What are the differnt forms/types of the labor market?
- professional (teachers, scientiests)
- skilled (carpenter, electricians)
- semi-skilled (food preparation, customer service)
- unskilled (agricultural worker)
What is wage determination?
Process by which wages are set in the labor market.
–> influenced by supply, demand and government policies
Where quanity of labor demanded equals quantity of labor supplied.
What is the demand for labor?
- quantity demanded depends on the price of labor
- firms aren’t interested in the amount of pounds they pay, they care how much output they need to sell in order to earn those pounds
- demand for labor increases as the real wage rate decreases
What is labor productivity?
What workers are actually producing per hour
What is the marginal product of labor?
Amount of output that can be produced in an additional hour of labor
What is the real wage rate?
- what can you buy in goods and services with the money you get
- Quantity of goods/services that a hour earns
- prices go down, wage stays the same –> real wage rate goes up
By what is the demand for labor shaped?
- productivity of workers
- price of output
- cost of capital (e.g. cheap machinery)
- regulations and taxes
-marginal revenue per worker?
On what does the supply of labor depends?
- on the real wage rate (it matters to households what they can buy with the earned money not how much they get)
- hours per worker
- employment rate
- working age population
–> supply of labor increase at least in the short term, when the real wage rate goes up because more people are willing to work
What is the labor market equilibrium?
- neither a shortage nor a surplus of labor
- full employment
- surplus (real wage rate down)
- shortage (real wage rate up)
What causes a growth in the supply of labor?
- government increase minimum wage
- population growth among the workforce
- retirement age goes up
Effect of an increase in labor productivity?
- economic growth
- higher wages
- job displacement
Why is there an growth in labor productivity
- Human Capital Growth (education and training)
- Physical Capital Growth (improved technology)
- Technological Advances (efficient machines??)
What are imbalances in the labor market?
Situations where the supply and demand for labor don’t match
What are they types of labor market imbalances?
- Unemployment (Labor surplus)
- Labor shortage (Deficit)
- Skill Mismatch
- Wage Imbalances
What are the effects of labor market imbalances?
- reduced economic growth
- increased public spending
- wage inflation
Solutions to adress labor market imbalances
- education and training
- labor mobility programs
- job matching platforms
What is the flexibility of the labor market?
- how easily companies can adjust their labor force
- true flexibility is limited by regulations, laws..
What are factors affecting the labor market flexibility?
- labor unions
- employee training
- minimum wage
- access to job information
What are the pros of labor market flexibility?
- lower unemployment
- increased GDP
- business adaptability
What are the cons of labor market flexibility?
- workers insecurity
- potential for exploitation
- imbalance of power
- weakened job protections
- lifestyle issues
What are ways to incerase labor market flexibility?
- lower or remove minimum wage laws
- weaken union influence
- improve education and training
- ease firing restrictions
What is labor market rigidity?
- difficult for employers to hire and fire workers
- presence of rules and regulations
What are the causes of a labor market rigidity?
- minimum wage laws
- strong labor unions
- employment protections
- generous unemployment benefits
