unemployment

• Demand for Labour 


  The amount of labour that employers are willing and able to employ at each wage rate (producers demand labour)
• Demand for Labour expectation

  At lower wage rates, the quantity demanded for labour is higher. As the wage rate rises, the quantity of labour demanded falls - ceteris paribus
• Supply of Labour 


  The amount of labour that employers are willing and able to supply at each wage rate (people supply labour)
• Supply of Labour Expectation

  At higher wage rates, the quantity supplied for labour rises. As the wage rate lowers, the quantity of labour supplied falls
• Structural vs Frictional unemployment - concern to government 


  An increase in structural unemployment would be of more concern to the government as frictional unemployment is only temporary. Its about individuals who are 'in - between jobs' or when the 'seasonal unemployment' ends, re-enter workforce. Whereas structural unemployment is more long term and caused by a slowdown in economic growth/workers unable to work until resolved
• Demand for Labour curve

  downward sloping - employers can afford to hire more workers at a lower wage rate, and the quantity demanded of labour increases
• Downward slope of the demand for labour...

  firms will intend to hire the most efficient and skilled workers first. They are prepared to pay higher wages to those workers first employed because that are more productive = earn the firm more revenue
• Demand for labour is derived

  from the demand for the final product
• The demand for labour curve will shift outward - right 


  if there is a boom in the economy, increase in the demand for products, as a result of increase in consumer spending
• Quantity of labour supplied curve

  quantity of labour supplied cannot go beyond the full employment level, the gradient becomes vertical to represent a limit to the actual number of individuals who are willing and able to work in the population
• Supply of labour curve

  upwards sloping - assume more individuals are more likely to give up leisure time if the wage rates are attractive enough
• The equilibrium wage rate and level of employment are

  determined by the intersection of the supply of labour curve and the demand curve for the labour in the labour market. At this equilibrium wage, all workers who want a job are employed
• At wage rates below the equilibrium level

  there will be a shortage of labour and employers will have vacancies they cannot fill. There will be pressure in the labour market for the wage rate to rise and labour levels will adjust accordingly
• At wage rates above the equilibrium level 


  there will be a surplus of labour. There will be a shortfall in job opportunities compromised of involuntarily unemployed because it indicates the number of workers who are willing to work but are unable to find work.
• Sticky Wages 


  Where wages tend to rise more easily then fall. Pressure for wages to fall but trade unions and workers resist this
• Reasons why sticky wages exist in the labour market

  Trade unions may affect the free operation of the labour market because they bargain for better work conditions and pay rates above the market equilibrium
• factors that lead to wages being 'sticky'


  Social + Institutional constraints on labour market. If market conditions change, wages can become 'sticky' Minimum wage set by the government. For example society norms/job perception. Causing interactions with the labour market, bargaining for pay rates above the market equilibrium, causing 'sticky' wages