Labour market Flashcards
What does it mean when they call labour a derived demand
It means the demand for labour is dependent on the demand of a good/service
Factors that influence demand for labour?
Wage rates
Demand for product
Price of other factors of production (capital)
Wages in other countries
Technology
Regulations
State of the economy
What is PED in labour market
The responsiveness of the change in quantity demanded of labour to the wage rates
Factors affecting PED of labour include?
The PED of the good
% of wages to total cost
Availability of substitutes
Over time PED will become elastic
Define supply of labour
The ability and willingness of people to make themselves available to work at different wage rates at any given moment and time
Factors affecting the supply of labour
Wage rates
Population and distribution
Non-monetary benefits (high job satisfaction)
Education and training
Trade unions and barriers to entry
Legislations
Working conditions
What are the types of market failure found in the labour market
Occupational (lack of transferrable skills) or geographical immobility
What is PES in the labour market
The responsiveness in the quantity supplied to a change in wage rates
Factors affecting PES in labour
- time (people will have more time to train)
- The availability of suitable labour in other industries (poach workers)
- Level of qualification and training (more training may be more inelastic)
Why may a labour market not be perfectly competitive?
Due to the presence of a monopsony driving wages down and a monopoly (trade union) driving wages higher (bilateral diagram)
What is a bilateral monopoly
When there is a presence of a monopsony and trade union that affect wage equilibrium
The wage that is set will depend on the relative bargaining strength of both
Define trade union
An organisations of workers that use collective bargaining to fight against discrimination and unfair pay in a working environment
List some issues in the labour market in terms of lack of workers
Skill shortages - due to immobility
Young workers - young people struggle to get jobs due to firms reluctancy
Retirement - affects government welfare spending and firms lose skilled workers
Wage inequality - relative poverty
Zero hour contracts - unknown weekly income
Government intervention to unfair pay
National minimum wage - a price floor set above market equilibrium
Arguments for NMW
Reduces poverty
Reduce male/female wage differentials
May make workers more loyal to businesses
More productive work force
