Chapter 6

• Labour market operation


  1. Supply of labour in households interacts with demand by firms

  2. This interaction gives us the wage rate
• Demand for labour


  Dependent on the demand for the products and services for which labour is required
• Wage determination


  Determined by the interaction between demand and supply
• In reality the government and trade unions exert influence on the actual wage level
• Shortage of workers


  Leads to higher pay
• Salary


  Paid monthly
• Wages


  Paid hourly
• Factors affecting workers in the labour market

  • Workers unwilling to move
  • Personal issues
  • Information failure
• Demand and supply graphs can be used to determine wage
• Factors affecting supply and demand of labour

  • Demand factors: Performance of the economy, Changing demand in specific markets, Wage rates, Productivity of labour, Profitability of firms
  • Supply factors: Wage rates, Other monetary benefits, Structure of population, Education and training
• If the economy sees growth


  Supply and demand of labour changes
• Gross pay


  The wage you receive before any deductions are made
• Net pay


  The amount of money that you have to spend or save after all deductions such as income tax have been made