labour markets Flashcards
(17 cards)
MRP
MPP x MR
-extra revenue generated whena n additional worker is employed
firms will only hire workers if they add more to a firms revenue then they add to its costs
firms will only demand workers if the mrp of the workers is at least equal to wage rate
Labour Demand
number of workes employers are willing and able to employ at a given wage rate
elasticiity of demand
substitutes-e.g mcodnalds high wage they will replace with checkouts
% of total cost
time
elastic demand of labour
if wages increase
mcdonalds willq ucikly replace workers with self service checkouts
inelastic demand of labour
increassse in wage
small reduction in workers laid off
for instance footballers
elasticiities of labour supply
skills and qualifications
unemployment levlels
time
Monopsony labour market
a s oel dominant buyer of labour in a given profession(NHS)
wage makers -set wage at profit max
Competitive labour markets produce at Qe
Monosponists exploit workers by offering wages much lowert han MRP and they under employ
Trade Union
organisation of workers uses colelctive bargaining to improve wage and non wage working conditions of workers in an industry.
trade union in a competitive labour mrket
if workers through trade unions are unsatisfied with pay the union can abrgain for a higher wage
firms are likely to accept this because the number of workrs they can lose if they reject and threat of striek action(negative puiblicity an strikes)
Firm thereform becomes a wage taker at trade union wage rate
trade union pros
can improve both wage and no wage condiitons(better pension plans longer paid leave epriods)
greater equity can bea achieved and reduce wage differentials
promote efficient outcomes in monpsony labour markets. monopsonist will improve wage and employment
trade union cosn
increase unemployment by pushing wages rates beyond compettive levels
excess upply of labour(realw age unemployment)
this concern is lower in monsopony labour market with tu involved
increase COP fo frimst his ca occur due to increas wages
firms amy shut down if they become to unprofittable
trade unions evaluation
depns on uniion density
union density meeasures the eprcentage number of workers in a profess
Trade Unions are more likely to be succesful when economy is in a period of strength not in a recession
this is because firms are more willing to increase wages when revenue is strong
gov can use regulations
evaluate the view that labour markets work best when strong monopsony power is balanced by trade union power
It does work best because trade unions bargain for higher wges
which increase wages overcoming unfair wages in a monospony
However it depends ont rade union density–additionally the success of union increasing wages depends on whether the works can collectivelly bargain(70% needed) Uk 23%
It Doesnt work best—trade union bargain for highern wages which means increase COP–may lay off workers
Howver–Increase wages – Increase PP –increase demand for goods –increase output– lower u,e(£12.21)
May not work best but goverment can itnervene with min wage
increase wage
wages rise above equilibrium
howver unintended consequences (real wage unemployment)
Labour Market Demand shift leftwards
fall in labour productivty
fall in demand for labour
at some wage rate of w11 there is escess supply where more workers willing able to work then firms need putting downwards pressure on wages
labour market supply shift right
market is intially in equilbrium with employment at q1 and wage at w1
fall in wage of ubsititutes
increase supply of labour
at same wage rate there is ane xcess supply
downward pressure on wages
Perfectly competitive labour market
-Firms are profit maximisers–only employ where MCl =MRP–hiring beyond the point cost of employer workers willb e higher than revenue
many indivudal suppliers of labour to market and many indivudal buyers of workers-implies firms must compete to offer wages that attract workers they need and worers dont have excessive abrgaining power
all workers in industry are homogenous with identical skill sets -firms are wage takers –
no barriers to entry such as training periods ,skills and qualfiifcations
no barriers to exit such as notice periods
shifting labour demand
Productivity: affects an individuals mrp by influencing marginal profit. if labour productivity increase mrp of workers rise. increasing the willingness and ability of firms to hire workers at a given wage rate.
Demand for final product; labour is a derived demand demand from the demand for goods and services rpoduced. if the demand for fianl product produced increses so will demand for labour which increases the willingess and ability of firms
price of final product -directly affects mrp by influencing marginalr evenue. if final price of a product increase the mrp of workkers rise. this increase willingess to hire
cost of capital-is an improtant determinant if capital becomes more expensive workers can substitute for capital a more profitable decison by firms increasing the willingess and ability of firms to hire workers at any
