3.3 Workers (Cambridge (CIE) IGCSE Economics) Flashcards

A trade union is an organisation formed by workers to protect and promote their common interests, particularly regarding pay, working conditions, and employment rights.

Collective bargaining is when trade unions negotiate with employers on behalf of all their members over wages, working hours, and benefits.

Large, well-organised unions can exert more influence in negotiations.

High union bargaining power can result in wage levels above what market forces alone would set.

True.

If it is easier and more cost-effective for a firm to substitute capital for labour, the bargaining power of the trade union decreases.

The lower the percentage of a firm's total costs that are wages, the higher the trade union's bargaining power.

The supply of labour is the amount of labour that households are willing and able to provide to a particular industry at a given wage rate.

Long training periods act as a barrier to entry and exclude many households from offering labour in certain markets.

A rise in income tax decreases the incentive for households to work, so the supply of labour decreases.

False.

Higher welfare benefits reduce the incentive for low-skilled workers to offer their labour, decreasing the supply of labour.

Derived demand is when the demand for a factor of production (such as labour) depends on the demand for the goods and services it helps produce.

An increase in the selling price incentivises the firm to produce more, which increases its demand for labour.

If the productivity of labour increases, firms are likely to demand more labour.

Labour market equilibrium is the point where the demand for labour (D) equals the supply of labour (S) in the market.

Price inelastic demand for labour is when a large change in wage leads to only a small change in the quantity of labour demanded.

The supply of highly skilled NBA basketball players is price inelastic because it takes years to develop such skills, so an increase in wage has little effect on the quantity supplied.

In the market for NBA basketball players, the equilibrium is found at a high wage and a relatively low quantity.

False.

Firms are usually price takers and must accept the prevailing wage rate to attract workers.

The demand for labour by firms forms a downward-sloping curve, while the supply of labour by workers forms an upward-sloping curve.

An increase in demand for labour is when the demand curve for labour shifts to the right, causing both the equilibrium wage and employment to rise.

An increase in the supply of labour can be caused by factors such as immigration, a higher working-age population, or more flexible working patterns.

A decrease in demand for labour leads to a shift of the demand curve to the left, resulting in a lower equilibrium wage and less employment.

A decrease in the supply of labour causes wages to rise and employment to fall.

Because small changes in wage rates cause significant changes in the quantity of labour demanded and supplied, as building site work is typically unskilled and many people can respond quickly to wage changes.

In the labour market for construction labourers, the equilibrium is at a low wage and a high quantity of labour.

A factor market is a market where the factors of production (such as labour, capital, and land) are bought and sold.

A minimum wage is a legally imposed wage level that employers must pay their workers. It is set above the market rate to ensure fair pay.

Governments set a minimum wage to improve equity and avoid the exploitation of workers.

False.

A minimum wage is set above the market rate to ensure workers receive fair pay.

A higher minimum wage increases the supply of labour (more want to work) but decreases demand for labour (firms hire less due to higher costs), potentially leading to unemployment.

Excess supply of labour occurs when more people want to work at the higher minimum wage than there are jobs available, creating potential unemployment.

The high minimum wage in Geneva was introduced to address the high cost of living and ensure low-income workers could afford basic needs.

False.

Studies have shown that unemployment does not always increase when a minimum wage is set; sometimes employment rises due to higher worker incomes and increased demand in the economy.

A wage differential is the difference in wage levels between different jobs, sectors, or workers, caused by factors like supply and demand, bargaining power, skills, and discrimination.

In competitive labour markets, wage levels are largely determined by the demand for labour and the supply of labour.

Specialist surgeons or talented basketball players have scarce skills, resulting in high demand and low supply, which pushes their wages up.

Primary sector workers usually earn the lowest wages, secondary sector workers earn higher wages, and tertiary sector workers tend to earn the highest wages.

False.

While some private sector workers can earn more, there are also private sector jobs with very low wages, and public sector salaries often have a maximum ceiling but also offer benefits and job security.

Strong trade unions can negotiate higher pay and better conditions for their members, often resulting in higher wages compared to non-unionised workers.

The gender pay gap is the difference in the average earnings between men and women across the workforce, usually expressed as a percentage of men’s earnings.

In 2023, the UK’s national gender pay gap was about 14%, meaning women earned 14% less per hour than men on average.

Discrimination based on gender, ethnicity, disability or other biases can cause workers with similar skills and experience to receive different wages, leading to wage gaps between groups.

Labour mobility refers to the ease with which workers can move between jobs, occupations, or geographical areas.

Labour is often one of the most expensive costs of production because employing workers requires ongoing payment of wages and benefits, which can be a significant expense for most firms compared to other inputs like capital or materials.

If firms substitute capital for labour, productivity often increases and costs decrease.

Occupational mobility is the ability of a worker to change occupations, often influenced by transferable skills, training, and qualifications.

High labour mobility in the European Union allowed workers from Spain to move to Germany for employment without visa restrictions.

Geographical mobility is the ability to move location for work, such as from one city or country to another, influenced by factors such as housing availability, family ties, language, and migration policies.

Barriers to mobility include family ties, lack of information about jobs, and the challenge of securing affordable accommodation in an unknown location.

True.

Brexit ended the free movement of labour between the UK and the EU, requiring visas for EU workers and making it harder for them to work in UK hospitality, which reduced geographical labour mobility and caused staff shortages.

The division of labour is when a task is broken up into several component tasks, allowing workers to specialise in specific parts of the process.

The famous economist Adam Smith developed the ideas of specialisation and the division of labour after observing workers in a pin factory.

Specialisation can occur on individual, business, regional, and global levels.

Adam Smith observed that dividing pin production into specialised tasks allowed 10 workers to produce 48,000 pins per day, compared to fewer than 20 pins per worker per day without division of labour.

Specialisation is when individuals, firms, regions, or countries focus on producing a narrow range of goods or services to increase efficiency and productivity.

A disadvantage of specialisation for workers is that the work can become repetitive and boring.

False.

Specialisation can lead to repetitive and boring work, which may decrease worker motivation and productivity.

One advantage for firms is that increased output allows them to generate more sales and profit, and higher productivity lowers cost per unit.

Over-dependency on other countries' resources is a disadvantage of specialisation for an economy.

Specialisation and division of labour can increase exports and productivity, leading to economic growth, higher incomes, and a greater variety of goods available in a country.