Labour Markets Flashcards
What determines the supply of labour
The supply of labour is determined by those
who want to be employed
What is a derived demand
This means that the demand for labour comes from the demand for what it produces
What is meant by inelastic labour
Big change in wage rates will lead to a smaller change in employment levels
What is meant by elastic labour
Big change in wage rates will lead to a big change in employment levels
What is demand for labour affected by
- The wage rate: The downward sloping demand curve shows the inverse relationship between how much the worker is paid and the number of workers employed
- Demand for products: Since the demand for labour is derived from the demand for products, the higher the demand for the products, the higher the demand for labour
- Productivity of labour: The more productive workers are, the higher the demand for them
- Substitutes for labour: If labour can be replaced for cheaper capital, then the demand for labour will fall
Factors that influence supply of labour
- Wage rate: The upward sloping supply curve shows the proportional relationship between how much the worker is paid and the number of workers willing and able to work
- Demographics of population: The more people there who are able and willing to work, the higher the supply of labour
- Migration: Migrants are usually of working age, so the supply of labour at all wage rates tends to increase
- Advantages of work: This can influence how much people prefer to work, and is linked to non-monetary advantages
- Leisure time: Leisure is a substitute for work, which is why part-time work and early retirements are attractive options for some people
- Taxes and benefits: If taxes are too high and benefits are too generous, people might be more inclined to withdraw from the labour market
What is the mobility of labour
The mobility of labour is the ability of workers to change between jobs
What are some current labour market issues
- Wage differentials:
- formal education, those with a degree earn more than those with just A levels
- skills, jobs hire those already trained
- discrimination, workers might be discriminated
- Impact of migration:
*there could be more competition to get a job due to the increase of working population - migrants tend to bring high quality skills to domestic workforce
- Unemployment:
- Uk as of 2015 unemplyment rate of 5.4%
How can government intervene in the labour market
- Set minimum and maximum wages
- Training
- Infrastructure (improve mobility of labour)
- Housing (make housing more affordable)
What factors effect elasticity of demand for labour
- How much labour costs as a proportion of total costs
- ## The easier it is to substitute factors, the more elastic the demand for labour, because firms can easily to switch to cheaper forms of production
What factors effect elasticity of supply for labour
- The skills of the workforce
- Length of training. The longer the training period for a job, the lower elasticity of labour supply
- Sense of vocation. Some jobs have rewards which are not financial, such as teaching
- Time period. In the short run, the supply of labour is more inelastic than in the long run
