W E L C O M E

TO
ECONOMICS

hey, I’m
Ibrahim!
 The Labour Market
Ch- 22; Pg- 163

Objectives for this chapter :

 Factors affecting the demand for labour
 Factors affecting the supply for labour
 Importance of Labour to Business
 Impact of Training on the quality of labour
 How wages are determined?
 relationship between
‘wage rate’ & ‘demand for labour’

Wage Rate – the amount of money paid to workers

for their services over a period of time.

‘wage rate’ &

‘demand for labour’
are inversely related.

It means, if one goes up the

other will go down. VICEVERSA

If the wage rate is high then it

is more costly for a business to
hire extra employees.
 relationship between
‘wage rate’ & ‘demand for labour’

EXAMPLE : maids vs washing machines, cement mixer truck vs labour

 Factors affecting the
Demand for Labour
1. Demand for the product
◊ The demand of labour depends on the demand for the products they produce.

2. Availability of Substitutes
◊ In many organizations, it is possible to replace people with machines.

◊ If firms believe that machines are more efficient and cheaper than people,

they will probably substitute people with machines.

3. Productivity of Labour
◊ If every worker is able to produce more, demand for workers is likely to increase.

4. Other Employment Cost

cost of pensions/sick pay/maternity pay/holiday pay/free meals etc.
 relationship between
‘wage rate’ & ‘supply for labour’

If the wage rate is high then the supply of labour will be higher as well.

‘wage rate’ &

‘supply for labour’
are directly related.

It means, if one goes up

the other will also go up.
 Factors affecting the
Supply for Labour
1. Population Size

More Population means more supply of labour.

ex. In Bangladesh/India there are unlimited supply of labour whereas in Canada/Russia it is not.

2. Migration

Many countries welcome immigrants to help increase the working population.

ex. Canada/Australia is welcoming immigrants to increase the supply of labour.

op
 Factors affecting the
Supply for Labour
3. Age Distribution of the population

As the ‘population’ ages (grows older), the dependency ratio may increase and this
places a financial burden on the rest of the population.

ex. Pension, other financial benefits like hospital costs etc.

4. Retirement Age

Once people reach a certain age they are entitled to a state pension. This is called
Retirement Age.

In Canada the age is 65, if government changes this age from 65 to 67, the supply of labour will be
increased.
 Factors affecting the
Supply for Labour
5. School Leaving Age

In many countries you cannot work until you are of a certain age.

In Ireland it was 16. But recently they changed it to 17. Due to that the supply of labour has been decreased
in Ireland.

6. Female Participation

Participation of women has increased the size of the working population.

ex. There is a huge demand for females as flight attendants.

7. Skills and Qualification

The supply of labour will tend to increase if people become more employable. This
can happen if people have good skills and are well qualified.
 Factors affecting the
Supply for Labour
8. Labour Mobility

Have you ever imagined what life would be like in another job or working in another country?

Labor mobility refers to the ease with which laborers are able to move around within an economy
and between different economies.

There are two primary types of labor mobility:

» Geographic mobility refers to a worker's ability to work in a particular physical location.

ex. a worker moving from the United States to France

» Occupational mobility refers to a worker's ability to change job types.

ex. an automobile mechanic who changes jobs to become an airline pilot
 Wag e D eter mi nati o n
The wage rate in any labour market is determined by the interaction of the
supply and demand for labour. [EQUILIBRIUM POINT]

The equilibrium wage is determined where the supply and demand for labour is equal.
 Wag e D eter mi nati o n
extraaaaa notes

The price of labour is known as the wage rate.

If wages are too high, then there is more labour supplied than demanded; we have
unemployment.

If wages are too low, then demand for labour will be high but supply will be low so
there will be a labour shortage. (workers will not work if they are paid too little)

[an hour of their leisure time is more valuable than a hour of work]

Firms will have to pay workers more as an incentive to work, and so the wage rate will
be bid up to the market clearing wage.
characteristics of high/low paid jobs

High wages for Jobs Low Wages for Jobs

1. In High Demand 1. Low in Demand

2. Highly educated 2. Generic Jobs

3. Highly specialized 3. No union

4. In strong unions 4. Low Education

5. Who do dangerous work 5. Declining Industry

6. In Growing and Expanding

Industry
CASE STUDIES

BOOK PG : 163-164
(1 - 2)
 CASE STUDIES

BOOK PG : 166
(1,2,3)
CASE STUDIES

BOOK PG : 168-169
(1 - 4)
 CASE STUDIES
always
has
been

wait,
another
case
study?!!

BOOK PG : 171
 M.C.Q
1. Which of the following is a possible disadvantage of oligopoly?

a. Lower Prices

b. Collusion

c. More Choice

d. More Innovation

2. Which of the following industries is likely to be oligopolistic?

a. chicken farming b. petrol

c. restaurant d. flower selling

3. If ___________ are successful, they are able to act as a monopoly.

a. collusion b. cartel

c. price wars d. interdependence

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