Topic 6 - The Labour Market Flashcards
(22 cards)
What happens when wage rates go up?
Demands for labour decreases in order to keep labour costs down.
What does it mean when we say that demand for labour is derived demand
This means that the demand is not actually directly to have workers but for what the workers will produce.
What does a fall in wage rate encourage the firm to invest in
More labour rather than capital machinery
What does an increase in wage rate encourage the firm to invest in
Increase in wage rate encourages investment into capital machinery rather than labour
What happens to demand for labour when the demand for a product goes down?
Lower demand for labour since the output must also decrease.
When does the labour demand curve shift left / right
— Shifts left when:
- Less demand for the good being produced
- capital machinery is cheap
- decrease in productivity of labour (capital is favourable)
— Shifts right when:
- capital machinery is expensive (labour needed instead)
- more demand for the good being produced
- employment subsidies by government (allows more labour workers for same labour costs as before)
- increase in productivity of labour (labour is favourable)
What is MRPL
Marginal Revenue Product of Labour is the extra revenue gained from employing one extra worker.
MRPL = MPL x MR
What is MPL
Marginal product of labour is the amount of units one extra worker increases the total by.
What is Wage elasticity of demand
The responsiveness of demand for labour after a change in wage rate
- skilled jobs such as doctors will have inelastic demand since they will still be needed despite
What is the equation for finding wage elasticity of demand/supply
. % change of quantity of labour demanded/supplied
Wage elasticity of demand = ——————————————————
% change in wage rate
What does wage elasticity of supply measure and what does wage elasticity of demands measure
Wage elasticity of supply measures the responsiveness of supply of labour after a change in wage rate. High skill jobs will often not have an impact since it takes longer to gain skills and therefore be inelastic while low skill jobs will be elastic.
Wage elasticity of demand measures the responsiveness in demand for labour following a change in wage rate. High skill jobs that are hard to substitute once again will be inelastic.
Factors affecting Labour supply in an industry depends on:
Wage rate
Qualification requirements/ skill related needs
Occupational mobility
Passion in the industry such as teaching
Anti social hours
Population
job security
What is structural unemployment
Unemployment due to a disappearing industry and the skill gaps in finding employment in another industry in which you lack experience.
What is occupational immobility
When there are barriers to poeple from being able to switch between jobs.
- Skill gaps
- experience gaps
- low confidence
- Training gaps
Causes of geographical immobility
Family ties
High costs of property/commuting
Language barriers
Access to good schools
Reasons for wage differences in monopsony markets:
Trade unions
Employer discrimination
Differences in labour productivity
What are some examples of monopsony powers
- NHS
- Armed forces
- large online retailers such as Amazon
What is a trade union?
Group which maintains the workers rights in a specific industry and aim to improve working conditions and pay for people in the group.
What is a monopsony power?
When there is a dominant employer in a market (doesn’t necessarily have to be a pure monopsony)
How do trade unions improve conditions for workers?
Collective bargaining -
— negotiate through strikes
— media campaigning
— litigation (legal action)
What are the negatives of a trade union raising wages in a perfectly competitive market
Leaves excess supply causing unemployment
What does Wage discrimination cause
Discriminated group is employed less and paid less leading to gender/race/sexuality inequality which is a market failure
