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20 Cards in this Set
- Front
- Back
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Demand for Labour |
The labour market is composed of sellers of labour (households) & buyers of labour (firms). Workers supply their labour & firms demand labour. The demand for labour is a derived demand meaning it depends on the demands for goods/services. |
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Factors that Influence the Demand for Labour |
The price of the product being produced, demand for final product, the ability to subsitute capital for labour, the productivity of labour. |
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Supply of Labour |
The number of hours a worker is willing and able to work at a given wage in a period. |
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Factors Influencing the Supply of Labour |
Training period, wages in other occupations, changes in migration policy, income tax levels, working conditions, trade union power, level of welfare benefits , social trends. |
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Market Failure in Labour Markets |
Occurs in the labour market when workers are unable to easily move between jobs. |
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Factors leading to Market Failure in Labour Markets |
Geographical immobility of labour - workers find it difficult to move from one area to another, Occupational mobility of labour - ability of a worker to change occupations when they lose a job. |
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Labour Market Equilibrium |
Occurs where the demand for labour is equal to the supply of labour |
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Current Labour Market Issues |
Skill shortages, youth unemployment, changes to retirement ages, school leaving age (Lower is an issue), Zero-hour contracts. |
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Maximum Wage |
A government imposed price ceiling below the market price & is rarely used. |
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Minimum Wage |
A legally imposed wage level that employers must pay their workers. It is set above the market rate and varies based on age. |
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National Minimum Wage |
The UK government imposes a national minimum wage which incentivises the supply of labour to increase due to higher wages. Facing higher production costs, the demand for labour by firms decreases |
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Policies to Tackle Labour Market Immobility |
Improved education/training, targeting skill shortages, relocation subsidies, reducing asymmetric information, reducing discrimination. |
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The elasticity of demand for labour |
This refers to how responsive a firms demand for labour is to a change in the price of labour (wage rate). If demand is elastic firms will be very responsive to changes in wage rates (rapidly hiring/firing workers when wages fall/rise). |
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Factors That Influence PED of Labour |
The proportion of labour costs to total costs, ease & cost of factor subsitution, PED of the final product, Time period. |
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The elasticity of supply of labour |
This refers to how responsive the supply of labour is to a change in the price of labour (wage rate). In low skilled occupations the quantity of labour supplies is very responsive to a change in wage rates, occupations which require longer training tend to have an inelastic supply of labour. |
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Cyclical Unemployment |
A type of unemployment that is caused by fluctuations in the business cycle or economic cycle. |
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Structural Unemployment |
A form of involuntary unemployment caused by a mismatch between the skills that workers in an economy can offer, and the skills demand by employers. |
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Seasonal Unemployment |
A situation where workers are unemployed at certain times of the year when demand has decreased. |
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Geographical Immobility of labour |
This occurs when workers find it difficult to move from one geographical area to another in order to secure employment e.g family ties, affording accomadation, lack of info about jobs. |
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Occupational Mobility of labour |
This refers to the ability of a worker to change occupations when they lose a job. If their skill base is transferable between different occupations, their occupational mobility is high. |
