3.5 Global labour markets

• How has globalisation contributed to the increase in the size of the labour force

  with ease of travel and less restrictions between borders, people have been able to find jobs more easily
• Why has production shifted from developed to developing countries

  companies can take advantage of the low labour costs in developing countries
• Why might unemployment in developed countries increase as a result of globalisation

  firms shift their operations to countries with low labour costs, leaving those in developed countries with no scope for employment
• List 4 factors affecting the demand for labour

  • wage rate
  • demand for products
  • productivity of labour
  • substitutes for labour
• Draw a graph showing the relationship between wage rate and the number of workers employed

  .

  
• Why do firms employ less workers as wages rise

  it may be easier for firms to invest in capital, which is cheaper and more productive than manual labour, so less workers are required
• If workers are more productive, will their wages be high or low

  their wages will be high
• If the market is unsaturated, how will this affect wages, and why?

  the firm is the only one in that market, and so has more bargaining power than workers, and will therefore offer lower wages
• How is the supply of labour calculated?

  By multiplying the number of people who can work at the current wage rate by the number of hours they can work
• Describe the relationship between the wage rate and the number of workers willing to work

  As the wage rate increases, the number of people willing to work increases
• Why do firms fear trade unions

  Trade unions have the power to increase wages and working conditions, thus raising costs for firms
• If taxes are too high, how will this affect the supply of labour

  This will reduce the supply of labour, because less people are willing to work knowing that more of their income is deducted with taxes
• What happens if trade unions push wages too high

  it will cost too much for firms to maintain their employment level, so they will cut down on the number of workers required
• Where on this graph is the employment level when a firm has monopsony power?

  The employment level is at W2 - Q2

  
• Describe the difference between individual and collective bargaining

  individual bargaining is between an employer and a employee, whereas collective bargaining is between employers and a group of employees
• What is productivity bargaining

  occurs when employers and employees meet to discuss wage rises given an increase in productivity
• Do minimum wages have to set above or below the free market price

  above the market price, else they will prove ineffective
• Draw a graph showing a minimum wage imposed

  .

  
• How will a minimum wage affect the demand for labour

  it will reduce the demand for labour
• If the demand for labour is inelastic, how will a minimum wage affect the demand level

  there will be a smaller contraction in demand than there will an increase in the supply of labour with a minimum wage
• How would a minimum wage benefit tax revenues

  It will increase tax revenues, because consumers will be earning higher wages and will therefore have to pay higher income tax
• How would a minimum wage affect competitiveness

  countries would become less attractive to foreign firms as higher wages would mean higher costs for those firms
• What is international competitiveness

  this is when firms can successfully complete overseas whilst sustaining improvements in real output and living standards