Labour Market

blue-collar workers

perform manual labour or skilled trades, often paid hourly

white-collar workers

perform administrative, professional or managerial tasks, typically in office settings and earning a salary

what is the labour force composed of

employed and unemployed individuals

economically active population

unemployed individuals, who are part of the labour force, and are actively seeking for unemployment

economically inactive population

unemployed individuals that are discouraged and do not take active steps to seek employment

do economically inactive population have a desire to work

yes

how is unemployed defined

using strict or expanded definition

name three types of unemployment

frictional, seasonal/cyclical and structural unemployment

frictional unemployment

individuals who are between jobs but have the skills to be employed

cyclical unemployment

unemployment that is associated with the upward and downward movement in economic activity

structural unemployment

occurs when workers’ skills and experience no longer match available jobs

participation rate

shows the proportion of the working age that is in the labour force

unemployment rate

shows the proportion of the labour force that is unemployed

what is the unemployment rate often criticised for

understating the level of joblessness

employment/absorption rate

shows the proportion of the working age population that are employed (paid work or self-employed)

what are the costs of unemployment

• loss of income

• limited support

• psychological impact

• experience gap

• risk of survival strategies

what are the assumptions of purely competitive labour market

• numerous firms compete with one another in hiring labour

• each of many qualified workers with identical skills supplies labour

• individual firms and individual workers are ‘wage takers’

what are the possible supply-side policies that may change unemployment outcomes

skill utilisation

what demand side polices may reduce unemployment

• support small businesses and informal sector

• promote exports, possibly with subsidies

• create jobs (unskilled) to boost demand short term

what determines workers’ bargaining power

• replacement costs

• job availability

what relationship does unemployment and wages have

an inverse relationship

give determinants for demand of labour

• productivity of labour (MPL)

• product price

• number of firms

• price of other factors of production

• demand for the final product

give determinants for supply of labour

• wage rate

• population and demographics

• education skills

• non-wage factors

• alternative opportunities

• social and cultural factors

labour unions

an organisation consisting predominantly of employees

what is the main purpose of labour unions

negotiating rates of pay and conditions of employment for its members

what are negative effects of unions

• feather-bedding and work rules

• strikes

• labour misallocation

what are positive effects of unions

• shock effect

• lower worker turnover

• increased informal training

what can higher wages trigger

wage-price spiral

why would someone leave the unemployment pool

• people or individuals may get hired

• an individual may no longer be of working age

• an unemployed person may become discouraged and stop looking for a job

why would someone enter the unemployment pool

• unemployed because they are new entrants in the labour force

• leaving a job to look for another job and thus be unemployed

• they are laid off and thus there is the possibility of being recalled if demand for a firms product recover

• got retrenched or if a firm completely shuts down