Labour Demand and Supply 11 Economics 11 Economics

Introduction  The labour market involves the interaction between employers (those who control capital) and employees (known as employment relations)  If the labour market is inefficient, it significantly hinders the capacity of an economy to grow (production possibilities)  Question - list the things you can think of that firstly support a strong labour market, and secondly which hinder a strong labour market

Demand for Labour  Businesses (firms) offer wages in return for labour. It is a market; if there is strong demand for the goods or services in an industry, generally, wages will go up because firms have to offer higher wages to attract workers  ‘Derived demand’ - this means that the demands for labour are a derivative (secondary effect) of the need for firms to produce goods and services to make a profit  Labour market - as prices for labour falls, a firm will employ more labour Is this right? Why, why not?Is this right? Why, why not?

Demand for Labour 2  Output of the firm If firms experience higher sales, they need more labour to keep up with demandIf firms experience higher sales, they need more labour to keep up with demand  There are many things that influence a firm’s capacity to produce. They include: General economic conditions - if good, more demand and vice versaGeneral economic conditions - if good, more demand and vice versa Consumer tastes - they change, and so therefore does the demand for labour inputs.Consumer tastes - they change, and so therefore does the demand for labour inputs.  List some examples Demand for an individual firm’s products - some firms simply have superior products and marketing campaigns which keep their output high.Demand for an individual firm’s products - some firms simply have superior products and marketing campaigns which keep their output high.

Demand for Labour 3  Productivity of labour In Australia, approximately 80% of cash outflows go towards labour costsIn Australia, approximately 80% of cash outflows go towards labour costs With such high costs, immense savings can be made with just a slight change to a firm’s labour costsWith such high costs, immense savings can be made with just a slight change to a firm’s labour costs How?How?  Capital machinery  Define productivity of labour in your books

Computer Work/ Homework  Use the computers to investigate some of the following statistics: What is Australia’s unemployment rate?What is Australia’s unemployment rate? How does it compare to other OECD countries? Compile a list of the unemployment rates of other countries with similar characteristics to AustraliaHow does it compare to other OECD countries? Compile a list of the unemployment rates of other countries with similar characteristics to Australia How does Australia’s wage rate compare to other countries?How does Australia’s wage rate compare to other countries? What proportion of Australia’s labour market is employed in manufacturing, services etc?What proportion of Australia’s labour market is employed in manufacturing, services etc? Find other statistics of interest that is relevant to Australia’s labour market.Find other statistics of interest that is relevant to Australia’s labour market.