Labour Market

Labour market

Market where workers sell their labour and employers demand and buy their labour.

• Households supply, firms demand

Factors that may determine wages of a job

• Demand and supply of labour

• Skill and education levels

• Experience

• Geographical location

• Government policies

• Industry type

Wages in a free market

Forces of supply and demand solely determine wages.

• The government and trade unions will exert influence on wage levels

Local labour market

Labour market within a short commuting distance from workers’ home.

National labour market

Labour market that covers a nation.

International labour market

Labour market covering many countries or worldwide.

Circular flow of income

Relationship between households and firms in terms of income.

1. Businesses provide to households income through wages

2. Households use wages to purchase goods / services from other businesses

3. Businesses use this income to pay wages

4. Repeats….

   → A circular flow of income

Labour immobility

Inability for workers to move between jobs.

Factors that cause labour immobility

• Lack of skills required

• Geographical immobility

• Information failure (not enough information about a job / available jobs)

Examples of information exchange

• Wage ranges

• Conditions of employment

• Age requirements

• Levels of competition

• Location of job