The Labour Market Flashcards
Differentiate between the unemployment rate and participation rate.
- The participation rate refers to the total supply of labour in the total labour market.
- The unemployment rate is the total amount of unemployed people in the economy classified by being 15 years or older or not working but actively seeking work.
Outline factors that affect the demand for labour.
The demand for labour is derived from the demand for goods and services it produces.
• Output of the firm
• Productivity of labour
• Cost of other inputs
Outline the factors that affect the supply of labour.
- Pay and working conditions - the higher the remuneration package and the more favourable the working conditions, the higher the supply.
- Education, skills and expertise - firms that require higher levels of education, skills or experience face lower supply levels of labour
- The mobility of labour - Geographic and Occupational mobility
Explain 2 factors that can influence the participation rate in Australia.
- State of the economy - if there is a strong economy the participation rate will increase due to more job opportunities that fit people’s specifications. If it is slow and stagnant, fewer jobs will be needed and people actively seeking work will no longer want to pursue it.
- Increased school retention rates - fewer people will get into the workforce as more will study in schools. However, higher education will result in higher degree jobs being filled.
Distinguish between occupational and geographic mobility.
Geographic Mobility
• Refers to the ability of labour to move between different locations
o Jobs and occupations that require workers to relocate to more distant locations with fewer educational and entertainment opportunities
Occupational Mobility
• Ability of labour to move between different occupations
o Degree of occupational mobility mainly depends on education and skills required for a particular occupation
What is a recent trend for employees working conditions
More flexible working hours and locations.
• reduce time spent commuting
• balance family responsibilities better
Explain how the labour market reaches equilibrium
What are the factors that influence labour demand?
Output:
• General economic conditions
• Conditions in the firm’s industry
• Demand for an individual firm’s production
Input:
• Productivity of labour v other inputs
• Cost of labour v other inputs v cost of foreign labour
Explain how productivity impacts the demand for labour.
• If AD doesn’t change, less workers will be needed as existing labour can produce more in a given period
o Okun’s Law – For unemployt to fall, EG needs to be higher than the increase in the labour force plus increase in
productivity. In Australia, this is estimated at a growth rate over 3%.
• Higher productivity makes labour more attractive over other input
What are the benefits of firms to employ casual workers
The firm does not need to pay additional costs for labour i.e. • Wages • Sick leave • Holiday pay • Workers' compensation • Long service leave • Superannuation
What are the factors that influence the participation rate
- The state of the economy (Economic condition)
- Ageing population trend and retirement age
- Changing social attitudes
- School retention rates
What are the factors for wage differentials within the same occupation?
- People who are more experienced generally considered more valuable and paid more.
- Geographic Mobility
- Enterprise Bargaining
- Firms capacity to pay
What is the difference between real wages and nominal wages?
- Real wages are adjusted for inflation that describe the real purchasing power that describes wages over time
- Nominal wages is the literal amount of money that doesn’t take account real purchasing power in a point in time
What are the benefits of inequality.
- Increase education and skill levels
- Encourage people to work longer and harder
- Entrepreneurs to accept more risk
What are the social costs of inequality?
- Poverty and social problems
- Well-being
- Social class division
- Inequality of opportunity
