3.5 labour markets

labour market

composed of sellers of labour (households) and buyers of labour (firms)

demand for labour is a derived demand

means that it depends on the demand for goods/services

factors that influence demand for labour

• Price of the product being produced

• Demand for the final product

• The ability to substitute capital for labour

• The productivity of labour

factors influencing supply for labour

• training period

• wages in other occupations

• changes immigration policy

• working conditions

• trade union power

Market failure in labour markets

occurs in the labour market when workers are unable to easily move between jobs

• geographical immobility of labour

• Occupational mobility of labour

geographical immobility of labour

When workers find it difficult to move from one geographical area to another to secure employment

Caused by

• family ties

• lack of info abt possible jobs in different parts of the country

occupational mobility of labour

refers to the ability of a worker to change occupations when they lose a job

• skill base is not transferable

• structural unemployment