Labour Markets Flashcards
(16 cards)
Define demand for labour
The quantity of labour that employers would wish to hire at each possible wage rate
Demand for labour determined by marginal revenue product - extra revenue generated from individual worker
Law of diminishing marginal productivity means that increasing number of workers while all factors are fixed increases MRP at first then causes it to decline
Downward sloping due to 2 reasons:
- long run factors vary so use machinery instead
- short run, factors fixed less return on capital so to hire, wage rate has to fall
MRP = Marginal output X price or difference in TR
Factors influencing Demand for Labour
- wage rates
- wages in other countries
- regulation
- state of the economy
- technology
- demand for the product
- price of other factors of production
Factors influencing PED of Labour
- proportion of wages to total costs of production
- time (SR and LR)
- substitutes
- PED of the product
Factors influencing supply of labour
wages and conditions in other jobs
non-monetary benefits
legislation
trade unions and barriers to entry
education
What does elastictity of supply of labour depend on?
time
unemployment
government spending tax subs
occupational and geographical immobility
Monopsony in the Labour Market
MRP = demand
AC of labour = supply
Monopsonits maximise revenue from workers where MRP = MC of labour
The lower the wages to the MRP, the greater the monopsonits power
Teachers, nurses - state
What is a bilateral monopoly?
Where both a monopoly and monopsony exist in a labour market
Labour market issues
- wage inequalities
- the Gig economy self employed uber
- retirement age
- migration
- skills shortages
- young workers
when was the UK national minimum wage set?
Labor set it in April 1999
Arguments for the national minimum wage
- reduces poverty
- reduces gedner differntials
- employees less likely to leave job due to business loyalty
- prevents the “unemployment trap” there is imcentive to work
- motivated by money
Arguments against national minimum wage
- loss of jobs
- wage spiral
- higher costs for companies
- ## no consideration for regional differences and ppl on minimum wage are secondary earners so poverty is not solved
For and Against Maximum wages
For
- reduces wage inequality
Against
- loss of the best workers
- excess demand
depends on elasticities
Tackling geographical and occupational mobility
Geo
- supply of houses
- subs on houses
- transport links
- national advertising
Occ
- education
- training within work
- flexible work pattterns so parents can work
Ways govenrment promote competiton and contestability
promotion of small business
derulation
competetive tendering
Protecting suppliers and employees
restrictions on monopsony power
workes rights
Controlling monopolies
- quality standards- yardstick comp
- price regulation - rpi - x + k
- profit regulation
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