Labour markets

Question 1

labour market

Answer 1

factor market, refers to supply and demand for labour (workers)
provide supply - employees
provide demand - employers

Question 2

what is labour

Answer 2

a derived demand, demand for labour comes from. the demand fro wha it produces

Question 3

what causes movements along supply and demand curves for labour

Answer 3

wage rate

Question 4

what is on y axis and x axis for demand and supply diagram of labour

Answer 4

x axis - number of employees
y axis - wage rate

Question 5

demand for labour and products relationship

Answer 5

derived demand:
higher demand for products, higher demand for labour and vice versa

Question 6

relationship between demand and productivity of labour

Answer 6

higher productivity of labour; higher demand of labour

• can be increased by better education+ training and using technology

Question 7

affect of substitutes on demand for labour

Answer 7

fall in demand - as you can find cheaper capital

Question 8

how does profitability affect amount of labour

Answer 8

higher productivity; more labour can be afforded to employ

Question 9

effect of number of firms on market on demand for labour

Answer 9

fewer firms; fewer buyers of labour; less demand

leads to lower wages

Question 10

define supply of labour/calculation

Answer 10

number of workers willing and able to work at the current wage rate multiplied by the number of hours thy can work

supply of labour = no. of workers at wage rate x no. hours they work

Question 11

factors affecting supply of labour

Answer 11

1. wage rate
2. Population (how many willing and able to work)
3. Migration
4. Added e edit to work (holidays, preference to work, promotions, low cost of working to afford childcare)
5. Leisure time
6. Trade unions (they will know worker rights will be protected)
7. Training, education, skill requirements
8. Taxes + benefits (high taxes, high benefits)

Question 12

2 types of market failure in labour markets

Answer 12

1. Geographical immobility - refers to things stoping FoP moving e.g due to family, social ties, financial costs of moving, imperfect market knowledge on work, regional variations on house prices
2. Occupational mobility - refers to things preventing FoP changing their use e.g labour find it difficult to change occupation, no transferable skills, insufficient education + training

Question 13

Labour market equilibrium

Answer 13

where supply of labour and demand of labour meet

Question 14

sticky wages

Answer 14

economic concept that Keynes stated describing how wages adjust slowly to changes in labour market conditions, as wages rates aren’t that flexible

Question 15

wage differentials meaning

Answer 15

when workers can be paid different amounts even in the same job

Question 16

reasons for wage differentials

Answer 16

• formal education (degree employees will earn more than someone who graduated out of A levels)
• Skills, qualifications and training (due to difficulty of job)
• Pay gaps (unskilled vs. skilled)
• Gender
• Discrimination (disability, race, age)
• Wages + skills - productivity and output of different skill level (can demand higher wages)

Question 17

impact of immigration on labour markets

Answer 17

• more competition
• migrants bring high quality skills (increases productivity)
• lower wages
• skills of migrant workers could replace those in domestic market

Question 18

why is unemployment a problem

Answer 18

consumers unemployed; less disposable income; standard of living falls; could have psychological affects - ruins mental health, lower welfare

Question 19

hysteresis

Answer 19

type of structural unemployment

someone works for a long time and their skills deteriorate

Question 20

where is minimum wage set on graph

Answer 20

set above equilibrium, above free market price

Question 21

where is maximum wage set on graph

Answer 21

below equilibrium, below free market price

Question 22

impacts of rise in national minimum wage

Answer 22

• no evidence of rise in unemployment (NMW is relatively low)
• yields positive externalities - increase standards of living, provide incentive for people to work
• less competitive on a global scale - cannot compete with countries with lower wages
• government will increase their tax revenue - due to higher wages; higher proportion
• harder for young people to find job as firms paying for more for labour; the skills they provide aren’t valuable

Question 23

impacts of maximum wage

Answer 23

• limits how much income one can earn, used to redistribute wealth equally
• should limit inflation (as wages limited)
• disincentive to innovate, workers opt for less demanding work
• lead to more equal distribution of wealth in society
• controls market wage but could lead to gov. failure if they misjudge where optimum wage should be

Question 24

how much government spending goes towards public sector pay

Answer 24

half of government spending

Question 25

public sector or private sector pay more equal

Answer 25

public sector

Question 26

what is the flexibility of the labour market

Answer 26

how willing and able labour is able to respond to changes in the market conditions

Question 27

policies to tackle labour market immobility

Answer 27

- trade union power - negotiate higher wages, increase job security - regulation - reduce regulation, increase freedoms to hire and fire - welfare payments and income tax rates - generous welfare payments, income tax rates high - less flexibility - training - more skilled workforce; more flexible labour market - infrastructure - improvements helps with geographical immobility, easier to move around - housing - more affordable; easier to move

Question 28

what does it mean if the labour demand inelastic what does it mean

Answer 28

few or no substitutes

Question 29

elasticity of demand for labour

Answer 29

how responsive demand for labour is when the market wage rate changes

Question 30

factors affecting elasticity of demand for labour

Answer 30

- cost of labour as a proportion of total costs (greater proportion; more elastic) - availability and ease to use substitute factors - PED of product (more elastic product; more elastic demand for labour)

Question 31

elasticity of supply of labour

Answer 31

responsiveness to the change in quantity of labour supplied to a change in wage rate

Question 32

factors affecting elasticity of labour

Answer 32

- skills of the workforce - length of training needed for a job - time period (short run - inelastic, long run - elastic) - sense of vocation (some jobs have rewards that aren’t financial; inelastic)