6.0 The Labour Market (All in 1)

What is the demand for labour derived from

The demand for labour is derived from the demand for the goods and services that labour

What is the marginal revenue product of labour

MRP is the additional revenue generated by employing one more unit of labour. It is calculated as MP x MR

What does the demand curve for labour show?

The relationship between the quantity of a labour and wage rate. The downward sloping curve shows a inverse relationship

What causes shifts in the demand curve for labour

Factors include:

• The demand for the product

• Labour Productivity

• The Price of Capital

• Government Regulations

• Wage Rates

• Elasticity of the labour

What determines the elasticity of demand for labour

Determinants include:

• The elasticity of the demand for the product

• The proportion of labour costs in total costs

• The ease of substituting labour with capital

• Years of training required

What influences the supply of labour to a particular occupation

Monetary Considerations and Non-Monetary considerations

What are monetary considerations

Factors such as wages, salaries, bonuses, and other financial incentives that attract individuals to a specific job or industry.

What are non-monetary considerations

Factors that attract individuals to a job based on aspects like job satisfaction, work-life balance, personal fulfilment, and career development opportunities. (e.g. flexible hours, company culture, and benefits)

What does the supply curve for labour show

The relationship between wage rates and the quantity labour supplied. Has a direct a relationship where higher wages typically lead to an increase in the quantity of labor supplied.

What causes shifts in the market supply curve for labour

• Changes in population

• Changes in education and training opportunities

• Government policies (e.g. immigration laws)

How are wage rates determined in a perfectly competitive labour market

Wage rates are determined by the intersection of the supply and demand curves for labour

What is the assumption about firms in a perfectly competitive labour market

Firms are wage takers, meaning they accept the market wage rate given

What happens if there is a surplus of labour in a perfectly competitive market

If there is a surplus, wages will fall, reducing the number of workers willing to work.

What happens if there is a shortage of labour in a perfectly competitive market

If there is a shortage, wages will rise, attracting more workers to the market

What is monopsony power in the labour market

Monopsony power occurs when there is only one employer in the labour market, giving the employer wage-setting power

How does a monopsony power affect wages and employment

A monopsonist can set wages below the competitive equilibrium, leading to lower wages and employment levels

What role do trade unions play in an imperfectly competitive labour market

Trade Unions can negotiate for higher wages and better working conditions, counteracting monopsony power

What is imperfect information in the labour market

Imperfect information occurs when workers or employers do not have complete knowledge about job opportunities or worker productivity

How do trade unions influence wages and employment

Trade unions negotiate for higher wages and better working conditions, which can lead to higher wages but may reduce employment if firms cannot afford the higher costs

What factors affect the ability of trade unions to influence wages

• Elasticity of demand for the product

• The proportion of unionised workers in the industry

• The strength and unity of the union

• The economic condition of the industry

What is the impact of trade unions on employments levels in competitive markets

In competitive markets, trade unions can drive wages above equilibrium levels, which may lead to unemployment if employers reduce hiring due to increased labour costs.

What is the impact of trade unions on employment levels in a monopsony labour market

In a monopsony labour market, trade unions can negotiate higher wages and better working conditions, which may lead to increased employment levels as employers differentiate their offers to attract workers.

What is the National Minimum Wage

The national minimum wage is the lowest legal wage that employers can pay workers, set by the government

What are the advantages of a national minimum wage

• Reduced poverty

• Increasing worker’s standard of living

• Encouraging higher productivity

What are the disadvantages of a national minimum wage

• Potential for increased unemployment

• Higher costs for business

• Possible inflationary pressures

Why might National Minimum Wage lead to increased unemployment

A national minimum wage may lead to increased unemployment because if the wage is set too high, employers may reduce hiring or lay off workers to manage higher labor costs, particularly in low-skilled job sectors.

What is wage discrimination?

Wage discrimination occurs when individuals are paid differently for the same work based on characteristic sunrelated to their job performance, such as gender or ethnicity

What conditions are necessary for wage discrimination

• Prejudiced attitudes or stereotypes

• Lack of transparency in pay structures

• Limited access to equal opportunities

What is the impact of discrimination on wages and employment

Discrimination can lead to lower wages and limited employment opportunities for affected groups, contributing to income inequality

What are the advantages of wage discrimination

• Cost Efficiency for Employers

• Enable businesses to offer cheaper products or services

• Solve itself by adjusting wages based on worker productivity and skills, leading to a more efficient allocation of labour resources.

Disadvantages of wage discrimination

Increased turnover rates, decreased employee morale, and potential legal consequences for companies. For the economy, wage discrimination can exacerbate income inequality and limit overall productivity.