Labour Markets

• The demand curve for labour shows the quantity employers wish to hire at each possible wage rate
• Firms hire workers to produce goods primarily to meet their aim of making a profit.
• The demand for labour is derived from the demand for the product the labour produces
• A wage is the price of labour
• As wage rates increase, the demand for labour decreases because the MRP must be higher for it to be worthwhile.
• If there is no demand for the product, there is no demand for the labour
• An increase in the output or price of a good will increase the demand for the labour that produces it.
• If machinery becomes cheap, firms may substitute it for labour, reducing the demand for labour
• If wages are lower in other countries, businesses may employ workers there, reducing demand in the UK.
• Improvements in technology have led to many jobs being replaced by machines
• High regulation within the labour market is likely to discourage firms from hiring
• The price elasticity of demand for labour measures the responsiveness of the quantity demanded to wage rate changes.
• The price elasticity of demand for labour is directly correlated to the price elasticity of demand for the product
• If wages are a large proportion of total costs, the demand for labour will be more elastic.
• If there are many substitutes for labour, the demand for labour will be more elastic
• In the long run, the demand for labour is more elastic because firms have time to develop machinery and move jobs.
• The supply of labour curve shows the ability and willingness of people to work at different wage rates
• The individual supply of labour curve is backward bending, showing that beyond a certain point, higher wages lead to fewer hours worked.
• A high population and a favorable age distribution increase the supply of labour
• Migrants often contribute to the workforce by being of working age and moving to countries like the UK to work.
• Non-monetary benefits, such as job satisfaction and perks, can increase the supply of labour
• Trade unions can restrict the supply of labour by introducing barriers to entry
• Government legislation, such as the school leaving age, can affect the supply of labour.
• Labour immobility can be occupational or geographical
• Geographical immobility occurs when workers find it difficult to move from one place to another due to family or cost reasons.
• The elasticity of supply of labour measures the responsiveness of supply to a change in wage rates
• If suitable labor is available in other industries, the supply of labor will be more elastic.
• Wage rates can differ within an occupation due to factors such as education, experience, and skill
• In a perfectly competitive labor market, wages are determined purely by demand and supply.
• In an imperfectly competitive labor market, wages are not always set where demand equals supply
• Trade unions operate as the only seller of labor
• When a trade union sets wages above the market equilibrium, it creates a kinked supply curve.
• Trade unions protect the rights and pay of workers through a process called collective bargaining
• Teachers' unions lobbied for a rule requiring all teachers to have degrees to increase wages by reducing supply.
• The supply curve becomes perfectly elastic up to output QS
• Steps taken by the government to reduce the power of trade unions

  1️⃣ Introduced postal ballots

  2️⃣ Outlawed secondary picketing

  3️⃣ Restricted the size of the picket line

  4️⃣ Forced unions to provide 14 days' notice of action
• The Trade Union Act 2016 requires at least 50% voting turnout in ballots.
• When both monopoly and monopsony exist in a labor market, it is called a bilateral monopoly
• In a bilateral monopoly, the wage depends on the relative bargaining strength of the firm and the union.
• In times of full employment, unions may have the power to influence wages upward to W3