Labour - Case Study 2019

Labour - Case Study 2019

1. Chapter 2: Local and national labour markets

   • Labour market = supply and demand
     • Shortages - lacks skills and surplus - unemployment
   • Demand for labour is derived
     • Derived from good/service demand
       • Increased demand + shortages = increased wages (eg. Google London)
   • Non-price determinants
     • Factors affecting S&D
       • Eg. tech = less manual labour
         • Only introduced if cost effective
         • Luddite = refuses tech as they lose out
   • Increasing supply
     • Real wages/less requirements/immigration easier and emigration harder
     • Reduced wage, lower equilibrium

2. Chapter 1: Role and importance

   • Defined: 3rd factor of production
     • Workers needed to produce goods/services
     • Number and abilities
     • Physical/mental contribution
     • Payment made
   • Effort of workers, not workers themselves
     • Productivity = value of labour
       • UK 17% productivity gap (G7 nations, eg. Japan and KAIZEN)
   • Specialisation
     • More productive but can cause structural unemployment
   • Different from other factors of production
     • Labour = hired, not owned
       • Influenced by non-wage aspects such as working conditions
   • Negative gradient supply curve - higher wage = fewer hour working week (69% GPs part time)
   • Legislation
     • Health and safety/Min wage (eg. Sports Direct £1m unpaid)

3. Chapter 5: Global market

   • Global labour predicted to more than double 1980-2030
     • 42% of planet = labour force, 51% in Britain due to ageing population/less below 16 and more women in work
   • Structural changes
     • Primary to secondary to tertiary (80% services UK)
       • Old age dependancy ratio, higher in developed than emerging, ageing population
     • Informal/Gig economy (50% against permanent full time work)
   • Interdependance of markets
     • Supply of labour and good supply, labour demand and good demand
     • One price operation, wage levels similar for same job worldwide
       • Wage differential equalised if non wage benefits reaped
       • Manufacturing moves from USA to cheap China, wages soar - standards of living, global wage convergence
   • Minimum wages in many LEDCs, rarely gained due to primary sector self employment/laws ignored
     • E.g. Congo - min wage of $68/month, average = $53!
   • Kaitz ratio = between wage and mean - 0.5 France, so half of mean. Lower = easier employment and growth but higher inequality, eg. USA
   • Migration, though real wages similar
     • Purchasing Power Parity = what can be bought in real terms
     • More migration in wealthier countries (except Japan, regulated)
     • Inching towards equal global wage rates

4. Chapter 3: Employment and unemployment

   • Unemployment, defined: able and willing
     • Looked for work past month, not worked and able to in next 2 weeks
     • Measured - labour force survey & claimant count (lower figure)
     • Rate = proportion of labour force out of work
       • Lagging indicator, rises post recession
   • Labour market at equilibrium
     • Unemployment = voluntary = at zero
     • Voluntary - better money elsewhere.poor conditions/quit before finding new job short term
       • Frictional unemployment
   • Geographical (location) + occupational (skills non transferable) = structural
   • Labour market clearance - speed that market adjusts
     • Usually slow due to minimum wages
       • Good when demand for labour is inelastic (eg. bus drivers)
     • Skills shortages post Brexit
   • Trade unions (eg. Aslef tube drivers, wages above equilibrium)
     • However more incentives for employers to automate
   • Gig economy - informal
     • Prepared to work below min wage,
       • Self employed, UBER and zero hours (15% inUK)
   • Regional unemployment - North/South divide
     • Northeners would accept lower nominal wage as real wage is higher

5. Chapter 4: Government policies

   • Increased average wage = less working hours
     • Supply diagram of labour = vertical, demand normal
   • Contractionary policy = higher taxes/interest rates to reduce deficit and inflation
     • Recession, sticky downwards wages do not fall quickly
       • Redundancies/lower real wage but austerity necessary to reduce future burden
   • Expansionary = avoid downturn/recession/counteract Brexit demand shock
     • Only voluntary unemployment left/Keynesian (4%)
       • However costs - inflation and debt
   • Supply side policies
     • Increase labour quantity/productivity
       • Education/free childcare
       • Tech/capital increases productivity but creates inequality (rich are richer, industrial revolution)

6. Chapter 6: Changing roles

   • Past similarities: Entrepreneur manages, but also self employment ie. self substinence hunters/farmers
   • Changes: Farm to factory, industrialisation means capital more important than land
     • Factory to office, secondary to tertiary service sectors growth
       • Less and less human input due to tech revolutions meaning more office work
         • Closer supervision such as online marking at school, but increased alienation and diseconomies of scale
         • Less health and safety risks but more sedentary, long term health problems
   • Future: internet revolution continues, technologically induced job losses = new jobs elsewhere
     • Artificial intelligence = 7m losses (transport, storage, admin and finance) but 7.3 created(health/social, IT and education)
       • New jobs rely on talent intellectually and emotionally
         • Narrow gap between gender participation rate narrows as more men in declining sectors
           • Less work for lower skilled but less 'dead end' jobs. Benefits for the emotionally intelligent