Demand for and supply of labour The demand for labour by individual firms
Firms demand labor by offering wages
Productivity of labour
Productivity of labor can be defined as the output per unit of labor per unit of time Increase labor productivity will have either a positive or negative effect
Dependent on: quality of labor force (E.g. skill, education, health, desire to perform) labor productivity can have: * Positive effect on aggregate demand (total demand rising) * Negative effect on aggregate demand (total demand falling or unchanged)
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Cost of other inputs If the cost of labor is relatively high, firms will choose capital over labor. If the cost of labor is relatively high, firms will choose capital over labor. This will mean that the demand for labor will decrease. Alternatively if the cost of capital is higher than the cost of labor, the demand for labor will increase.
Working conditions
Attractive working conditions encourage a higher supply of labor to a workplace
Participation rate
This refers to the proportion of the working age population (employed, unemployed and people looking for work) in the workforce.
Employed
A person is defined as employed if they have one or more hours of work per week.
Unemployed
A person defined as unemployed if they currently are available for work, are activity seeking work but unable to find Unemployment rate = No. of unemployment x 100 Total labour force
Wages are generally paid per hour. This means that you have to be present and working in order to get paid. Salary refers to how much you get paid every year Real wages refer to wage rates adjusted to inflation rate Nominal wages refer to the amount of money given to an employee
Wage outcomes for all persons by income groups, occupational groups, age, gender and cultural background
Higher levels of training and education are higher paid because they are professionals, whilst lowest paid groups are labourers and personal services workers The middle aged section of workforce earn the most Men tend to earn more than women. Weekly women earn 65% of men. Immigrants earn less
Trends in the distribution of income from work over time The wide spread use of enterprise bargaining has created a much greater difference in wage incomes for both different industries and individuals.
Differences also result from changes in structure of the economy emerging industries requiring skilled labor pay wages
Are the benefits that many employees receive in addition to their ordinary and overtime payments, such as sick leave, superannuation Can vary from one workplace to another and in some industries, Award rates are a minimum wage rate determined by Fair Work Australia Collective agreements are wage rates organized with a firm between employees and employers Common Law contracts are wage rates organized between employer and employee
Arguments for and against a more equitable distribution of income from work
Economic benefits of inequality * can productive capacity of resources and thus real GDP per capita. - Encourages the labour force to increase education and skills levels - Encourages the labour force to work longer and harder - Makes the labour force more mobile Economic costs of inequality - Can reduce economic growth - Reduces consumption and investment - Creates poverty and social problems
Cyclical unemployment influenced by the business cycle Structural unemployment mismatch between the skills demanded by employers and those possessed by unemployed people Long-term unemployment unemployed for 12 months or more Seasonal unemployment seasonal nature of some jobs Frictional unemployment occurs as people change jobs and will always be present, but can be limited by efficiency of job placement services Hard-core unemployment refers to individuals who are generally considered unemployable Hidden unemployed refers to people who are unemployment but not actively seeking work Underemployment unemployed casually or part-time but seek fulltime work
Part-time work
Working 20 hours or less per week Casualization of work
Employees have occasional working hours but do not follow any set pattern. Has no sick leave or holiday pay.
Outsourcing, Sub-contracting
Outsourcing (or sub-contracting): when an organization pays another business/subcontractor to perform a function.
Contractors A person or company that undertakes a contract to provide materials or labor to perform a service or do a job. It is an agreement between two or more persons Trends
Upward trend in the average level of unemployment between 1970s and 1990s Average rate of unemployment fell to an average of 5.5% in the first decade of the 21 st century Levels of unemployment peaked in the early 1990s (10.7%) highest since great depression Lowest point of unemployment was early 2008 3.9% (Financial Crisis)
Labour market institutions Unions Trade union: association of workers that aims to advance the interests of its members by improving their wages and working conditions.
Types of unions:
Occupational unions: Members from persons who possess a particular occupational skill, or range of skills, regardless of the industry or firm in which they work Industry based unions: cover workers in a particular industry Enterprise-based unions: represent only the workings of one specific enterprise General unions: cover a whole range of workers across various industries
The most important union in Australia is Australian Council of Trade Union (ACTU) Represent workforce Negotiate and resolve disputes
Employer associations
Are organizations that are formed to represent the interests of businesses, especially in industrial relations and in lobbying the government.
They have two main roles: o They represent and promote the interests of their members by lobbying the government o They assist employers in managing industrial relation issues, such as representing their members
Topic 1: Introduction to Economics Income (Y), Consumption (C) and Saving (S) Y=C+S C=Y-S S=Y-C Real Interest Rate = Nominal Interest Rate - Inflationary Expectations e.g. If the nominal interest rate was 8% on a mortgage loan and inflation was 3%, the real interest rate would be 5% Final Income = Gross Income - Taxation + Social wage (transfers) Topic 2: Consumers and Business Profit Maximisation Profit = Total Revenue (TR) - Total Cost (TC) Total Revenue (TR) = Price (P) x Quantity Sold (Q) Total Cost (TC) = Fixed Costs (FC) + Variable Costs (VC) Cost and Revenue Theory Average Cost (AC) = Total Cost (TC) Output (O) Marginal Cost (MC) = TC O Average Revenue (AR) = Total Revenue (TR) Output Marginal Revenue (MR) = TR
O Law of Diminishing Returns Average Physical Product (APP) = Total Physical Product (TPP) Units of Variable Factor (L) Marginal Physical Product (MPP) = TPP Topic 3: Supply and Demand Elasticity (E) = %Qd %P e.g. 15%/10% = 1.5 Topic 5: Financial Markets Interest Rate Spread or Margin = Lending Rate - Borrowing Rate Profit = Interest Income + Other Income - Costs
Topic 6: Government and the Economy Taxation Revenue = Tax Base x Tax Rate
Average Rate of Taxation and Marginal Rate of Taxation ART = Tax Payable Taxable Income x 100
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