Pack 5: Labour Markets Flashcards
(34 cards)
What is derived demand?
Goods demanded only because they are needed for production of other goods
What are the determinants of labour demand?
~Higher/lower wage rates
~Demand for final product
~labour productivity
~Change in price of capital
~Tech developments
What is wage elasticity of demand for labour?
Responsiveness of quantity demanded of labour to change in wages
What factors influence the elasticity of demand for labour?
~Labour as % of total cost
~PED for final product
~Ease of substitution between capital and labour
~Time period
What is wage elastic demand for labour?
More than proportionate response in labour demand to a change in wage
What is wage inelastic demand?
Less than proportionate response in labour demand to a change in wage
What are the conditions when demand for labor is elastic?
~Labour high % of total cost
~Demand for final is price elastic
~Labour easily substituted for capital
~In the long-run rather than short-run
(opposite for inelastic)
What factors lead to changes in the supply of labour?
~Higher/lower wage rates
~Size of working pop. (demographic, migration, income and tax benefits)
~Level of skill and qualifications required for job
~Wages in substitute occupations
~Non-monetary characteristics of an occupation
What is wage elasticity of supply for labour?
Responsiveness of quantity of labour supplied to a change in wage
What factors affect the elasticity of supply for labour?
~Time and cost of training/education needed
~Geographic and occupational mobility
~Time period
What are they key wage differentials in labour markets?
~Between occupations (high banker + football pay)
~Between genders (male-female pay gap)
Why are wage differentials present?
Demand for high skilled workers more inelastic and they can produce higher revenue, e.g. merchandise for football players
Wage determination in non-competitive markets, what influences it?
~Monopsony power
~Trade unions
What effect will monopsony power have on wages?
Could drive down wages, workers cant apply for jobs elsewhere
How do trade unions effect workers and wages?
Have counter-veiling power, drive up wages and if market, of it was above market equilibrium could lead to unemployment as up supply, down demand. However, if market has monopsomy power they will push back up to equilibrium leading to up wages and employment
What is labour immobility?
Inability of workers to take available work, either geographically or occupationally
What is geographic immobility?
Inability of workers to take available work in different areas/regions
What is occupational immobilty?
Inability of workers to change occupations to take available employment
Why is labour immobility a market failure?
Producing inside PPF as there are unemployed resources, so resources are allocated inefficiently
What is one of the main causes of labour immobility?
Structural unemployment
What are the causes of geographic immobility?
~Moving from area of low house prices to one of high house prices
~Lack of availability of affordable renting accommodation
~Costly + time consuming to move house
~Large differences between costs of living in regions
~Social attachments to previous region
~Barriers to international travel
What are the causes of occupational immobility?
~Workers have lack of appropriate training/education
~Workers can’t take time off work to get trained
~Lack of availability of affordable training or education
~Workers lack confidence or are apathetic
What are some policies to improve geographic mobility?
~Relocation subsidies
~Improving supply of affordable housing
~Maximum rents
~Improving infrastructure
What are policies to improve occupational mobility?
~Training schemes for unemployed
~Improve vocational training
