Labour Markets

• Derived demand


  Demand for a factor of production or intermediate good that occurs as a result of the demand for another intermediate or final good
• Demand of labour


  Derived from the demand for a good/service and economic circumstances
• Government intervention


  Can intervene through micro and macro economic policies to control business activities
• Supply of labour


  The proportion of working people
• Factors affecting demand


  • Output of the firm
  • Consumer spending patterns and output
  • Productivity of labour
  • Cost of other inputs
  • Wages
• Output of the firm


  How much a firm produces in a certain time
• Change in consumption for goods/services

  Affects labour
• In boom


  Producing more, employ more people, higher employment
• In recession


  Business produce less, fire people, lower employment
• Less demand


  Leads to less employment
• More demand


  Leads to more employment
• High economic growth


  Leads to higher demand for labour
• In a boom


  Participation rates will rise, leading to shortages of labour
• In covid


  Spending fell, less jobs, higher unemployment
• Productivity of labour


  Output per unit of labour employed over time
• Higher levels of productivity


  Increase in demand for labour, employers hire more
• Lower level of productivity

  Less hiring, employers use substitute methods like capital
• More productivity


  Higher economic activity, high employment
• Less productivity


  Opposite effect
• Cost of other inputs

  Affects labour employment
• If capital is cheaper

  Leads to less employment
• In primary and secondary industries

  More capital is utilised as employment is low skilled
• In tertiary industry


  Most employment, need a human touch that capital can't provide
• Wages


  Affect labour employment
• As business want to reduce costs


  More will be hired if min wage is cheaper to increase productivity and stay at low costs
• If capital is more expensive

  More employment
• If capital is less expensive

  Less employment
• If they are equal


  More likely for labour to be used and structural employment will occur
• Factors influencing supply of labour

  • Population size
  • Participation rate
  • Flexibility or pleasant work conditions
  • Education and training qualifications
  • Pay/remuneration
  • Occupation and geographic mobility of labour
• Population size


  Greater population allows an increase in the potential of a work force and the supply of labour
• Participation rates


  Proportion of those able to work that are actually employed
• Higher participation


  High labour supply
• Lower participation


  Lower labour supply
• In a boom


  Participation rates rise
• In a recession


  Participation rates fall
• Participation rate


  Workforce / working age of population x 100
• Flexibility and pleasant work conditions


  Increase supply of labour for certain groups
• Education and training qualifications


  Affect supply of labour
• More education needed for a position


  Lower supply of labour
• Lower skilled employment


  Increased supply of labour