The demand for labour is derived from the demand for other goods/services.
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Supply of Labour
The number of people offering themselves as available to work in a certain industry.
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Why does the demand curve slope down?
As wage rates rise, firms are less able to fund employment.
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Why does the supply curve slope up?
The higher the wage, the more desirable the job becomes.
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Backwards bending supply curve
There is a point where wages become so high that people will become well of enough to seek less hours.
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Factors affecting the demand for labour
Labour turnover, Promotion schemes, Seasonality, Wage rate, Physical Productivity (how good the workers are).
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Factors affecting the supply of labour
Wages, Benefits/Perks, Legislation, Welfare Benefits, Education, Population Size.
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Elasticity of demand for labour
Measures the responsiveness of demand for labour when there is a change in the market wage rate.
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Elasticity of demand for labour formula
%change in quantity demanded of labour/ %change in wage rate.
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Factors determining elasticity of demand for labour
How elastic the product is, Existing employment contracts, Training time, Substitutes such as technology, Strong union presence and Proportion of labour costs out of total costs.
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Elasticity of supply of labour
Measures how responsive the supply of labour is to a change in wage rate.
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Elasticity of supply of labour formula
%change in quantity supplied of labour/ %change in wage rate
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Factors determining elasticity of supply of labour
Working conditions, Qualifications required and the time taken to get them, Location, Unemployment rate
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Wage Setting
The government has control over public wages. If they freeze them/lower them, then more people will move to the private industry; if they raise them, then more people will move to the public industry and private wages will increase also.
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Labour Immobility
The inability of an economy to be able to transfer their labour resources between different uses.
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Geographical Immobility
Refers to the difficulties people have with finding jobs in other areas.
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Reasons for Geographical Immobility
Transportation, Friends and Family ties, Access to information, Housing costs.
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Occupational Immobility
Refers to the problems associated with moving jobs, usually to do with skills, education and experience.
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Market Failure- Labour Immobility
The lack of workers because of it may mean that products/services cannot be provided to meet market demand.
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Methods of solving labour immobility
Improving education and training, Relocating subsidies and housing, Offering grants to businesses in low income areas.
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Current Labour Market Issues
Skill shortages, Youth Unemployment (Around 10%), Changes to retirement age, Schooling age, Nature of contracts (temporary, zero-hours, flexible).
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Other cards in this set
Card 2
Front
The number of people offering themselves as available to work in a certain industry.
Back
Supply of Labour
Card 3
Front
As wage rates rise, firms are less able to fund employment.
Back
Card 4
Front
The higher the wage, the more desirable the job becomes.
Back
Card 5
Front
There is a point where wages become so high that people will become well of enough to seek less hours.
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