Theme 3 - Labour markets Flashcards

Question

why do men get paid more than women

Answer 1

⚖️ Gender Discrimination in Hiring and Pay 🔗 Gender biases can influence hiring and pay decisions, often favouring men for higher-paying roles 🔗 Men are often overrepresented in high-paying industries like finance or tech 🔗 Women may be overlooked for promotion opportunities or higher-paying positions 🔗 Leads to a pay gap as women are often stuck in lower-paying sectors or roles 👨‍💼👩‍💼 💼 Occupational Segregation 🔗 Men and women tend to work in different occupations due to social norms or career choices 🔗 Men are often in higher-paying, male-dominated fields, while women are more represented in care or teaching roles 🔗 These fields tend to have lower average wages than male-dominated industries 🔗 The result is a gender pay gap where men earn more on average due to industry disparity 🏢👩‍🏫 👶 Childcare and Career Interruptions 🔗 Women are more likely to take career breaks or work part-time for childcare responsibilities 🔗 These breaks can lead to career stagnation, fewer opportunities, and less experience over time 🔗 Men, typically less likely to take career breaks, can advance in their careers more quickly 🔗 This disrupts women's earning potential and contributes to the overall gender pay gap 👶🧑‍👩‍👧‍👦 💵 Negotiation and Salary Transparency 🔗 Research suggests that men are more likely to negotiate their salaries, while women are less likely to ask for higher pay 🔗 Without proper salary transparency or union backing, employers may offer lower starting salaries to women 🔗 This sets women on a lower wage trajectory, even if their job responsibilities are similar to men's 🔗 Leads to a persistent pay gap over the course of their career 📉 📈 Implicit Bias in Promotions and Performance Evaluation 🔗 Women may face implicit biases in performance reviews and promotions 🔗 Men are often rated higher in terms of leadership qualities or job performance, even when women do the same work 🔗 This leads to lower promotions or salary increases for women compared to their male counterparts 🔗 Men's earnings increase faster, leading to a widening gender pay gap over time 📊

Answer 2

📈 Market Demand and Revenue Generation 🔗 Football clubs generate huge revenue from ticket sales, broadcasting rights, and sponsorships 🔗 These revenues allow clubs to offer higher salaries to attract top talent 🔗 Football is a global industry, with massive demand and audience size, especially for big clubs like Real Madrid or Manchester United 🔗 Footballers earn a larger proportion of the income they help generate compared to teachers 💸⚽ 🌍 Global Market and Talent Pool 🔗 Footballers are part of a global market with limited spots in top-tier teams, making their skills more scarce and valuable 🔗 Clubs compete to attract the best talent, leading to higher wages as the price of skilled players increases 🔗 In contrast, the demand for teachers is more stable and widespread,whilst supply is larger meaning individual teachers are less valuable in terms of scarcity 🔗 Leads to footballers earning much more due to their unique market position 🌎 🏆 Entertainment Industry Premium 🔗 Football is part of the entertainment and sports industry, where stars are marketed for their appeal and celebrity status 🔗 High-profile footballers bring in sponsorship deals, merchandise sales, and commercial deals 🔗 This provides additional income that doesn't rely on their club's revenue alone 🔗 Teachers, while essential, are not marketed or commercialised in the same way, limiting their earning potential 🎬💼 🔁 Performance-Based Earnings vs. Set Salaries 🔗 Footballers earn through performance-based contracts and bonus systems for goals, assists, or winning titles 🔗 This creates the potential for higher earnings if the player performs well or brings in more fans and revenue 🔗 Teachers typically have fixed salaries, regardless of their individual performance or results 🔗 Footballers' salaries are more variable, and in top leagues, extremely high due to performance incentives 🏅💥 🏅 Short Career Span in Football vs. Long-Term Stability in Teaching 🔗 Footballers often have a short career span (around 10–15 years), meaning they need to earn more while they are playing 🔗 Their relatively short working life means their lifetime earnings must be much higher to sustain them after retirement 🔗 Teachers can have a longer career (30–40 years), but earn less overall because their pay is spread over a longer duration 🔗 This contributes to the disparity in salaries, as footballers are compensated for their shorter earning window ⏳⚽

Answer 3

🏙️ Agglomeration Economies London benefits from agglomeration economies, where businesses cluster together ➡️ This boosts productivity, innovation, and access to skilled labour ➡️ Higher productivity means workers generate more value per hour ➡️ ⏩ Firms can afford to pay higher wages to attract and retain skilled staff 💼 Higher Concentration of High-Skill, High-Wage Industries London is home to industries like finance, law, and tech, which offer high salaries ➡️ These sectors demand highly skilled workers, who are in limited supply ➡️ To compete for talent, firms pay premium wages ➡️ ⏩ This pulls the average wage in London above that of other UK regions 🏠 Higher Cost of Living London has significantly higher housing, transport, and childcare costs ➡️ Employers offer London Weighting or higher base pay to compensate ➡️ Without this, workers may be unable to afford to live there ➡️ ⏩ This artificially raises wages compared to lower-cost Northern areas 🎓 Greater Access to Education and Opportunities London offers access to top universities, training schemes, and global firms ➡️ This improves skills, experience, and employability of its workforce ➡️ More skilled workers tend to command higher wages in the labour market ➡️ ⏩ This leads to a widening regional wage gap over time 🛫 Global City Status and Foreign Investment As a global financial hub, London attracts multinational firms and FDI ➡️ These firms bring capital, jobs, and international salaries ➡️ To compete globally, they offer high wages to meet international standards ➡️ ⏩ Boosts London pay far above many domestic regions

Answer 4

⚖️ Discrimination and Bias in the Labour Market 🔗 Racial discrimination can lead to ethnic minorities being offered lower wages for the same roles or qualifications 🔗 Employers may have unconscious biases that favour certain ethnic groups over others in hiring or pay decisions 🔗 This creates a pay gap between ethnic groups, as people of certain ethnicities may face unjust barriers to higher-paying jobs 🔗 Discriminatory hiring practices lead to lower overall earnings for certain ethnic groups 📉👥 🧑‍🏫 Differences in Educational Attainment and Access 🔗 Some ethnic groups may have less access to quality education, leading to lower qualifications on average 🔗 This can result in a lower starting wage or fewer opportunities for higher-paying jobs 🔗 Structural inequalities in education or social mobility can limit the earning potential of certain ethnic groups 🔗 This contributes to a wage gap where groups with lower access to education earn less 📚🎓 🌍 Segregation in Low-Wage Sectors 🔗 Ethnic minorities are often overrepresented in lower-wage sectors, such as hospitality, retail, or manual labour 🔗 These industries generally offer lower pay and fewer opportunities for career progression 🔗 Many ethnic groups face fewer opportunities to move into higher-paying roles or industries 🔗 This occupational segregation contributes to persistent wage inequalities 💼🏬 🏙️ Geographical Factors and Economic Opportunities 🔗 Ethnic minorities are more likely to live in economically disadvantaged areas, where job opportunities may be more limited 🔗 This reduces access to higher-paying jobs, as employers in lower-income regions may pay less 🔗 Additionally, ethnic minorities may face higher unemployment rates or difficulty finding stable work 🔗 These factors combine to contribute to lower wages in disadvantaged ethnic communities 🏚️📍 📊 Unequal Access to Networks and Social Capital 🔗 Many high-paying job opportunities are obtained through personal networks or social capital 🔗 Some ethnic groups may not have the same professional networks or access to industry connections 🔗 This makes it harder for certain groups to access job opportunities or mentorship that can lead to higher wages 🔗 As a result, ethnic minorities may find themselves underpaid or overlooked for career-advancing positions 📱🤝 🧑‍🤝‍🧑 Structural Barriers in Promotion and Career Advancement 🔗 Even when ethnic minorities are employed in the same roles as their counterparts, they may face fewer promotion opportunities 🔗 Implicit bias in performance evaluations or leadership positions may limit advancement prospects for certain ethnic groups 🔗 Lack of mentorship or career development programs tailored to minorities can also affect career progression 🔗 This leads to lower wages due to fewer promotions or advancement in their career 🏢📉

Answer 5

🔹 1. Higher Wages Through Collective Bargaining Trade unions negotiate collectively on behalf of workers → Increases bargaining power compared to individuals → Employers may raise wages to avoid disputes or strikes → Workers enjoy higher incomes and improved living standards 💷 🔹 2. Improved Working Conditions Unions campaign for better health and safety standards → Employers respond with workplace improvements → This reduces injuries, absenteeism, and compensation costs → Leads to a more productive and reliable workforce 🦺 🔹 3. Greater Job Security Unions negotiate contracts that limit unfair dismissal → Employees feel more secure and motivated → Lower staff turnover reduces recruitment/training costs → Firms benefit from a more experienced workforce 🛡️ 🔹 4. Encouragement of Training and Development Unions support access to vocational training → Workers improve their skills and adaptability → This raises labour productivity and efficiency → Firms gain a competitive edge from a skilled workforce 🎓

Answer 6

💷 1. Higher wage demands Trade unions may push wages above the market equilibrium → This increases firms' costs of production → Firms may respond by cutting jobs or raising prices → This can lead to unemployment and reduced allocative efficiency. 🛠 2. Reduced labour market flexibility Unions may resist changes to working hours, contracts, or job roles → This limits the firm's ability to adapt to market changes → Firms become less responsive to demand or innovation → Causing X-inefficiency and less productive outcomes. 🏭 3. Fall in competitiveness Wage increases not matched by productivity cause unit labour costs to rise → This raises prices of goods, especially in labour-intensive industries → Firms may struggle to compete with foreign producers → Resulting in lower exports and potential job losses. 📉 4. Misallocation of resources If unions protect inefficient workers or unproductive jobs, resources aren’t reallocated to better uses → This distorts the labour market signals sent by prices and profit → Firms may continue operating in declining industries instead of innovating → Leading to lower dynamic efficiency in the long run.

Answer 7

💪 It depends on the strength of the trade union Stronger trade unions with high membership can bargain more effectively ➡️ This increases their ability to negotiate higher wages and better conditions ➡️ But if the union is weak or fragmented, employer resistance may prevail ➡️ ⏩ 💬 The effectiveness of a trade union is significantly shaped by how organised and unified it is 🏭 It depends on the market structure and monopsony power In a monopsony, where one employer dominates, wages are below competitive levels ➡️ Trade unions can raise wages closer to the socially efficient level without causing job losses ➡️ But in a competitive market, union wage rises may lead to unemployment ➡️ ⏩ 🏗️ The benefits of a trade union are clearer in monopsonistic markets 📈 It depends on productivity growth If rising wages are matched by increased productivity, firms can absorb the cost ➡️ This can lead to win-win outcomes: higher wages, stable employment, and output ➡️ But if productivity remains flat, firms may reduce employment to control costs ➡️ ⏩ 💼 The impact of trade unions is more positive when they align with productivity improvements 💼 It depends on the state of the economy In a booming economy, firms are better able to afford union-negotiated wage increases ➡️ This may support higher living standards without harming jobs ➡️ But in a recession, wage hikes may lead to layoffs or reduced hours ➡️ ⏩ 📉 The macroeconomic context shapes whether trade union actions are sustainable or harmful 🌍 It depends on the industry In labour-intensive or low-margin industries, wage rises can hit profitability hard ➡️ Leading to relocation, outsourcing or redundancies ➡️ But in high-skill, high-profit sectors, unions may drive better outcomes without risk ➡️ ⏩ ⚖️ Sector-specific factors determine how feasible or risky union demands are

Answer 8

💸 1. Higher Costs for Firms (Inflationary Pressure) Trade unions negotiate higher wages for workers → wage increases across the economy ➡️ Firms face higher labour costs, especially in unionised sectors ➡️ To compensate, firms may raise prices of goods and services ➡️ Leads to inflationary pressures, reducing purchasing power for consumers 📉 2. Reduced Competitiveness Higher wages and stronger bargaining power may lead to higher production costs ➡️ Firms in unionised industries may struggle to compete with non-unionised or international firms with lower labour costs ➡️ Reduced global competitiveness can result in firms relocating or downsizing ➡️ This may reduce national economic growth and lead to structural unemployment 🚫 3. Labour Market Rigidity Trade unions can demand strict working conditions or employment contracts ➡️ These may discourage firms from hiring or expanding their workforce ➡️ Labour market flexibility becomes limited, making it harder for businesses to adapt to economic changes ➡️ This can slow down recovery during recessions or reduce overall employment 📊 4. Potential for Over-Protection of Workers Unions may fight for excessive job security, making it difficult for employers to fire underperforming employees ➡️ Inefficient firms are kept alive due to strict job protections, even if they lose money or are uncompetitive ➡️ Leads to misallocation of resources, as less productive workers remain employed while more efficient workers may face cuts ➡️ Decreases overall productivity in the economy

Answer 9

Macroeconomic Advantages of Trade Unions 💼🌍 🔹 Trade unions negotiate higher wages for workers → Increased incomes lead to higher consumer spending → Higher aggregate demand boosts overall economic growth → Supports job creation and reduces unemployment 🔹 Trade unions improve working conditions and job security → More stable and satisfied workforce increases productivity at a macro level → Higher productivity contributes to better national output (GDP) growth → Strengthens competitiveness of the economy internationally 🔹 Trade unions act as a voice for workers in policy debates → Help push for labor-friendly policies like minimum wage laws, social protections → These policies reduce income inequality and social unrest → Promotes social cohesion and long-term economic stability 🔹 Trade unions can encourage investment in training and skills development → A better-skilled workforce improves human capital → Increases the economy’s potential output and efficiency → Enhances long-run economic growth prospects

Answer 10

⚠️ Wage Increases May Cause Inflationary Pressure → While higher wages boost demand, they can also lead to cost-push inflation if firms raise prices to cover wage hikes → This can erode real income gains and hurt international competitiveness ⚠️ Potential for Labour Market Rigidity → Strong unions may resist necessary labour market flexibility, leading to higher unemployment if wages are kept above market-clearing levels → Could discourage firms from hiring, especially youth or low-skilled workers ⚠️ Variation by Industry and Union Strength → Macroeconomic benefits depend on how widespread and strong unions are → In sectors with weak union presence, impacts on wages, productivity, and policies may be limited ⚠️ Short-Term vs Long-Term Effects → Some positive effects like improved productivity or social cohesion take time to materialize → Short-run impacts might be inflationary or increase costs without immediate growth benefits ⚠️ Globalisation and Labour Market Competition → In open economies, higher wages negotiated by unions could push firms to relocate to lower-wage countries → This risks job losses and reduces trade union influence over macroeconomic outcomes ⚠️ Trade-Off Between Equity and Efficiency → Trade unions promote wage equality and better conditions, but this can sometimes come at the cost of economic efficiency and flexibility

Answer 11

Union-Set Wage May Be Below Competitive Wage: In a monopsony, wages are typically set below the competitive equilibrium because the firm has power over wage-setting. While the trade union can negotiate higher wages, they may not reach the market equilibrium wage, which is where supply and demand for labor would naturally meet in a competitive market. 💔 1. Employer power may still dominate negotiations A monopsonist (e.g. NHS) may still have significant market power despite union presence ➡️ They can resist union demands due to lack of alternative employers for workers ➡️ Workers have low bargaining power if they can’t easily leave ➡️ ⏩ 💼 The union may struggle to influence wages or conditions effectively ⚖️ 2. Government-imposed wage restraints In public sector monopsonies, the government may set strict wage controls or pay caps ➡️ Even if unions demand higher wages, the employer is restricted legally or fiscally ➡️ This limits the union’s ability to secure better deals ➡️ ⏩ 🧾 Union impact is weakened by external budgetary constraints 🧍‍♀️ 3. Low union membership weakens influence In some sectors, union density is very low, reducing collective bargaining power ➡️ Employers may feel under no pressure to negotiate ➡️ Individual workers lack influence and may fear retaliation for striking ➡️ ⏩ 🤐 Without strong membership, union efforts may be ignored 📉 4. Risk of job losses or reduced hours If a union pushes for higher wages above MRP, the monopsonist may reduce employment ➡️ This can lead to job cuts, reduced hours, or hiring freezes ➡️ Particularly likely if demand for the firm’s output is falling ➡️ ⏩ ⚠️ Union action could backfire, harming the very workers it aims to protect

Answer 12

🚫 Discrimination 🔗 Unfair treatment in hiring or promotion based on race, gender, or age can prevent qualified individuals from securing jobs 🔗 This leads to underutilisation of talent and an inefficient allocation of labour 🔗 As a result, some workers remain unemployed or underpaid, while employers miss out on skilled candidates 🔗 Discrimination wastes valuable human capital and increases inequality in the labour market 💔⚖️ 📚 Imperfect Information 🔗 Workers may lack knowledge about job opportunities, wages, or the specific skills employers demand 🔗 Similarly, employers may not know the full range of skills a potential employee has, leading to missed opportunities 🔗 This information gap can lead to mismatches where workers take jobs that don't align with their qualifications, or employers hire workers who aren't the best fit 🔗 The inefficient allocation of labour results in unemployment or underemployment 📉🧠 🛠️ Skills Shortages 🔗 There may be a mismatch between the skills employers demand and the skills available in the workforce 🔗 This leads to vacancies in certain sectors or industries, where employers can't find qualified workers 🔗 On the other hand, some workers may be overqualified for the jobs available, leading to structural unemployment 🔗 Skills shortages cause a labour market failure as some sectors face empty positions and others have surplus workers 👷‍♀️🔍 🚶‍♀️ Labour Immobility 🔗 Geographical or occupational immobility means workers may find it difficult to move to other locations or industries with more job opportunities 🔗 This is often due to family ties, housing costs, or lack of transferable skills 🔗 As a result, workers remain in areas or sectors with limited job prospects, while other areas face labour shortages 🔗 Labour immobility creates inefficiency and prevents optimal allocation of workers across regions 🌍🏚️ 🏢 Monopsony Power 🔗 A monopsony occurs when a single employer (or a few large employers) dominates the labour market in a particular area 🔗 These employers can suppress wages and reduce the bargaining power of workers, leading to lower wages than would be expected in a competitive market 🔗 Workers may also face limited job options and poor working conditions, as they have few alternative employers to turn to 🔗 Monopsony power results in inefficiencies and wage suppression, harming both workers and the overall labour market 📉👥 💸 Inequality 🔗 Wide disparities in income and wealth can create disincentives to work, particularly for lower-income groups 🔗 Workers may feel discouraged from entering or remaining in the workforce if they believe they won't earn a livable wage 🔗 Income inequality can also lead to unequal access to education, training, and job opportunities, exacerbating labour market failure 🔗 Inequality leads to a less productive workforce and a misallocation of resources 💰⚖️ 💵 Tax and Welfare System 🔗 High marginal tax rates or complex benefit systems can discourage individuals from entering or remaining in the workforce 🔗 For example, workers may find that earning more results in higher taxes or a reduction in benefits, creating a disincentive to work 🔗 This discourages some individuals from seeking higher-paying jobs or pursuing promotions 🔗 The tax and welfare system creates inefficiencies in the labour market by distorting work incentives 🏛️📉 🌍 Geographical Barriers 🔗 Geographical barriers, such as high housing costs, limited transportation options, or regional unemployment, can prevent workers from seeking jobs in other areas 🔗 These barriers create a mismatch between where workers are located and where the available jobs are, contributing to labour shortages in some areas and unemployment in others 🔗 Workers may also face additional costs (such as moving expenses) that discourage them from relocating for better job opportunities 🔗 Geographical barriers contribute to inefficiency in the labour market by limiting worker mobility 🌍🏠

Answer 13

🏷️ Increase in Wages for Union Members Trade unions negotiate higher wages for their members compared to non-union workers ➡️ By collectively bargaining, unions can leverage their collective strength to secure better pay and benefits ➡️ This leads to higher wages for union workers, especially in industries with less competition for labour ➡️ In monopsonistic markets, where there is one dominant employer, unions can push wages closer to the competitive level by reducing the employer's wage-setting power ⚖️ Impact on Employment Levels Trade unions can reduce employment in certain industries ➡️ Higher wages negotiated by unions may lead to higher labour costs for firms ➡️ This may cause firms to reduce employment as they adjust to the increased cost of labour ➡️ For example, in monopsonistic markets, unions can push for wages that lead to job losses if firms cut back on hiring to offset higher wages 🏢 Improvement in Working Conditions Trade unions advocate for better working conditions, which can indirectly impact employment and wages ➡️ By negotiating for safer, healthier environments, unions improve job satisfaction and reduce turnover ➡️ This can lead to higher productivity and potentially higher wages for workers, benefiting both workers and employers ➡️ The improvement in conditions can attract more workers to the industry, influencing overall employment levels 💼 Increased Bargaining Power in Imperfect Labour Markets Unions are particularly powerful in imperfect labour markets (e.g., monopsonies, oligopolies) ➡️ In markets with a small number of employers, unions can aggregate workers' bargaining power, which is otherwise difficult for individual workers ➡️ This can lead to higher wages and more favourable working conditions in industries where firms have little competition for labour ➡️ However, the impact may be limited if the market is highly competitive or if unions lack strong organizational power 🏗️ Potential for Structural Unemployment Unions may inadvertently contribute to structural unemployment ➡️ By negotiating for higher wages, unions may price out less skilled or less experienced workers from the job market ➡️ In the long term, high union wages can make it harder for certain groups (e.g., young workers, those with low skills) to find employment ➡️ The higher wage floors set by unions may not align with market equilibrium, leading to a mismatch between wages and job availability 🛠️ Efficiency vs. Equity Trade-off Unions contribute to equity, but at a potential cost to efficiency ➡️ Unions advocate for fair wages and better working conditions, ensuring that workers receive a more equitable share of the firm’s profits ➡️ However, higher wages and better conditions may lead to higher costs for firms, which could result in lower competitiveness or a reduction in output ➡️ This creates a trade-off between ensuring fair pay for workers and maintaining firm profitability, especially in industries facing global competition 🔄 Possible Negative Impact on Labour Market Flexibility Unions can reduce the flexibility of the labour market ➡️ By pushing for rigid wage structures and long-term contracts, unions can make it harder for firms to adjust to changing market conditions ➡️ This may result in slower responses to economic downturns or shifts in demand, leading to higher unemployment during recessions or periods of low demand ➡️ Firms may also be less willing to hire if they perceive union restrictions as too costly or inflexible 🔄 Union Influence on Pay Disparities Unions can reduce income inequality in sectors where they are strong ➡️ Unions ensure that wages are more equally distributed within firms, addressing wage gaps between lower- and higher-paid workers ➡️ This reduces the disparity between executive compensation and average workers' wages ➡️ However, union influence may not be as effective in sectors with high skill levels, where income disparities are driven more by individual productivity or external factors 📉 Diminishing Returns in Highly Competitive Labour Markets In perfectly competitive or highly competitive labour markets, union influence diminishes ➡️ In such markets, firms have little power over wages, and competition for workers is high, so unions have less negotiating leverage ➡️ Even if unions push for wage increases, employers can easily hire workers from other firms to meet their labour needs ➡️ This limits the effectiveness of unions in markets where supply and demand for labour are very elastic

Answer 14

When a union calls a strike, the disruption it causes forces employers to respond, often by increasing wages to retain their workers or to avoid productivity losses. This is particularly relevant for lower-skilled jobs or jobs with limited competition for labour, where employers rely heavily on retaining workers. As a result, strikes can shift the labour supply curve to the left, increasing wages to a level above the market equilibrium, especially in sectors where there is a lack of alternative employment options for workers. Consequently, employers may be willing to pay higher wages to maintain stability and avoid the operational costs of strikes or worker shortages."

Answer 15

💰 Efficiency Wage Theory Chain Firms pay wages above the market equilibrium to attract and retain higher-quality workers → This incentivises greater productivity, as workers fear losing a well-paid job → Higher wages can also reduce shirking and absenteeism, improving overall efficiency → Therefore, despite higher wage costs, firm profits may rise due to better performance and lower turnover.

Answer 16

🧱 Lump of Labour Fallacy – Explanation Chain The fallacy assumes there is a fixed amount of work in the economy → So, people think if more jobs go to certain groups (e.g. immigrants or older workers), fewer jobs are left for others → But in reality, the labour market is dynamic — new workers can increase demand, investment, and job creation → Therefore, this belief is flawed as it ignores how economies grow and adapt, creating more employment opportunities over time. 🌍 Chain 2: Policy Application – Immigration A government opens its borders to skilled immigration ⟶ Critics argue this will take jobs from native workers due to the lump of labour belief ⟶ However, immigrants can increase aggregate demand, start businesses, or fill skill shortages ⟶ So, instead of reducing jobs, immigration can boost productivity and employment.

Theme 3 - Labour markets Flashcards

(40 cards)