The Labour Market

Question 1

Demand For Labour

Answer 1

• Derived (Impacted by demand for goods and services or increase in skill need)

Elasticity Impacts:
- Ease and cost of substitution
- Elasticity of demand for final product (how easy can increase in labour costs be passed to consumers)

Question 2

Supply For Labour

Answer 2

• Amount of people willing to sell their labour at a certain wage

Elasticity Impacts:
- Level Of Training Needed To Fill Shortages
- Occupational and Geographical Mobility

Question 3

How can Geographical and Occupational Mobility Issues Be Overcome?

Answer 3

Investment in transport and housing
Investment is skills programmes and universities

Question 4

Causes Of Gender Pay Gap

Answer 4

• Women more likely to take a career break (loss of skills e.g Limited Ability to Operate New Technology)
• Discrimination
• Women less likely to enter stem fields (reduced labour mobility)

Question 5

Ways To Solve Gender Pay Gap

Answer 5

Investment in Childcare Provision (to mitigate career break impact)
Training Programmes (to reduce skill gaps form career breaks)
Legislation to mitigate discrimination

Question 6

Monopsonies

Answer 6

Singular Buyer Of Labour

• In order to increase wage for one staff, all staff must receive a wage rise
• Therefore MC>Supply Of Labour Curve meaning there is underemployment as they stop at MC = MR
• They provide wage rate and value added to the company which is supply curve
• Therefore they underpay and underemploy

Question 7

Ways to mitigate monopsony power

Answer 7

• Increase national minimum wage
• Establishment of trade unions

Question 8

Impact of Trade Unions and NMW

Answer 8

Help solve problems in a monopsony market but create unemployment in a market with multiple buyers of labour

Question 9

Backwards Bending Labour Supply Curve

Answer 9

At a certain wage rate, workers don’t need to work as many hours to maintain a lifestyle standard, causing them to work less hours

Question 10

Advantages Of Trade Unions

Answer 10

• Can improve wages and prevent monopsony power and bring market towards allocative efficiency
• High wages can incentivise work leading to increased productivity
• Working conditions can be improved

Question 11

Disadvantages Of Trade Unions

Answer 11

• Can cause unemployment in non-monopsonist markets
• Increased Wages = Increased Costs For Firms = Less Profit = Less Dynamic Efficiency

Question 12

Advantages Of Removal Of Bankers Bonuses

Answer 12

• Bonuses are awarded based on performance which incentives being productive = greater productive efficiency

Question 13

Disadvantages Of Removal Of Bankers Bonuses

Answer 13

• Increased Costs for firms in bonus payments
• Bankers will be able to outcompete other individuals for goods and services as they are rationed to who can pay the most - causing growing inequality