Specialisation

Specialisation

1. Determenants of Supply

   • Wage Rate
     • An increase in the wage rate will lead to an increase in the supply of labour, dur to the incentive of higher pay. Leisure time has a higher opportunity cost.
   • Net advantages of occupation
     • These include tips, career progression and job satisfaction
   • The level of qualifications
     • The higher the qualifications / training / work experience required, the lower the supply of labour
   • Government Social Security Benefits
     • This includes Job Seekers Allowance. The higher the benefits, the lower teh supply of labour, as people have less incentive to work for low paid occupations.
   • University Fees
     • An increase in university fees may lead to an increase in supply of school leavers to the labour market
   • Age of Workforce
     • Lowering of the school leaving age/ increasing retirement age will increase the supply of labour, as more people are economically active.
   • Migration
     • The single European market for labour has increased net migration flows into the UK, so the supply of labour has increased
   • Trade Unions
     • Fight to raise wage rates and improve working conditions, so increase the supply of labour

2. Determinants of Demand

   • Labour is DERIVED DEMAND. It is demanded as a result of demand for another good.

3. National Minimum Wage

   • Gov. intervenes to minimise poverty and increase the standard of living of the lowest paid workers
   • Increases cost for fims, cost of production
     • Lowers porfits, or even creates loses
       • Firms may lay off workers or even exit industry
   • Evaluation
     • Inelastic demand for labour
       • Few jobs lost
     • Elastic demand for labour
       • Lots of jobs lost
     • Magnitude of National Minimum Wage
     • Wage costs as a proportion of total costs
       • High % in a labour intensive market
         • Harder to absorb wage rise, so greater impact
     • Already pay above NMW/ NMW is below equilibrium point
       • Little/no effect
     • Does not effect training staff
     • Firms may decide to employ workers illegally
       • Limits impact on unemployment
       • Reduces Gov. revenue from income tax

4. When an individaul, firm or country concentrates on the production of a limited range of good or services, by allocating all its resources to their production

5. Disadvantages

   • Overdependent on one good
     • When demand falls for a good, prices fall, affecting employment and economy
       • Since profits for producers decreases, firms exit market or lay off workers to reduce costs.

6. Advantages