2.7 The labour market

• What does the labour market consist of?

  Supply of labour by workers and demand by firms
• What determines the price of labour?

  The interaction of supply and demand for labour
• What is derived demand in the context of labour?

  Demand for labour based on product/service demand
• What factors can prevent the labour market from functioning effectively?

  Geographical and occupational immobility
• What are the main factors affecting demand for labour?

  • Demand for products/services (derived demand)
  • State of the economy (boom or recession)
  • Wage rate
  • Real wages (adjusted for inflation)
  • Productivity of labour
  • Probability of gains
• What are the main factors affecting supply of labour?

  • Wage rate
  • Other benefits/payments (overtime, PRP)
  • Size of the working population
  • Non-monetary factors (working conditions)
  • Barriers to entry (lack of training)
  • Education and training
  • Total number of willing and able workers
• What is the definition of active labour supply?

  Employees, short-term sick, unemployed, self-employed
• What is the definition of inactive labour supply?

  Retired, looking after family, students
• What is a recession?

  A period when GDP falls for two consecutive quarters
• What is gross pay?

  The money earned before deductions
• What is net pay?

  The amount after all deductions are made
• What is the formula for calculating net pay?

  Net pay = gross pay - deductions
• What are trade unions and their purpose?

  • Organizations acting on behalf of members
  • Aim to improve pay and working conditions
  • Provide collective bargaining power
• What types of actions can trade unions take?

  • Negotiations
  • Go slow (work slower)
  • Work to rule (only job description tasks)
  • Strike action (refusal to work)
• How does geographical immobility affect the labour market?

  It prevents workers from relocating for jobs
• How does occupational immobility impact the labour market?

  It limits workers' ability to fill available jobs