1. Labour Markets, Wages and Industrial Relations Labour Markets, Wages and Industrial Relations

2. The UK Labour Market Trends in the UK labour market –sectoral shift from agriculture to manufacturing from manufacturing to services Trends in the UK labour market –sectoral shift from agriculture to manufacturing from manufacturing to services

3. Employment in different sectors of the UK economy

8. The UK Labour Market Trends in the UK labour market (cont.) –rise in part-time employment Trends in the UK labour market (cont.) –rise in part-time employment

9. Full-time and part-time employment in the UK

10. Total employment Full-time and part-time employment in the UK

11. Total employment Full-time employment Full-time and part-time employment in the UK

12. Total employment Full-time employment Part-time employment Full-time and part-time employment in the UK

13. The UK Labour Market Trends in the UK labour market (cont.) –rise in part-time employment –rise in female participation rates Trends in the UK labour market (cont.) –rise in part-time employment –rise in female participation rates

14. The UK Labour Market Trends in the UK labour market (cont.) –rise in part-time employment –rise in female participation rates –rise in temporary employment Trends in the UK labour market (cont.) –rise in part-time employment –rise in female participation rates –rise in temporary employment

15. The UK Labour Market Trends in the UK labour market (cont.) –rise in part-time employment –rise in female participation rates –rise in temporary employment –effects of downsizing Trends in the UK labour market (cont.) –rise in part-time employment –rise in female participation rates –rise in temporary employment –effects of downsizing

16. Market-determined Wage rates and Employment Perfect labour markets –assumptions of a perfect labour markets everyone is a wage taker freedom of entry perfect knowledge homogeneous labour –determination of the market wage horizontal supply curve to individual employers horizontal demand curve for individual workers Perfect labour markets –assumptions of a perfect labour markets everyone is a wage taker freedom of entry perfect knowledge homogeneous labour –determination of the market wage horizontal supply curve to individual employers horizontal demand curve for individual workers

17. S all workers in the market D all firms in the market O Labour hours Hourly wage WmWm A labour market: whole market

18. D individual employer O Labour hours Hourly wage Q1Q1 WmWm S labour A labour market: individual employer

19. O Labour hours Hourly wage Q2Q2 WmWm D labour S individual worker A labour market: individual worker

20. The supply of labour –the supply of hours by an individual worker marginal disutility of work income and substitution effects of wage changes the shape of the individual’s supply curve of labour The supply of labour –the supply of hours by an individual worker marginal disutility of work income and substitution effects of wage changes the shape of the individual’s supply curve of labour Market-determined Wage rates and Employment

21. The marginal disutility of hours worked O Hours worked Disutility MDU

22. The supply of hours worked O Hours worked Hourly wage S

23. Backward-bending supply curve of labour S WIWI Hourly wage Hours O

24. The supply of labour –the supply of hours by an individual worker marginal disutility of work income and substitution effects of wage changes the shape of the individual’s supply curve of labou r –the supply of labour to an individual employer The supply of labour –the supply of hours by an individual worker marginal disutility of work income and substitution effects of wage changes the shape of the individual’s supply curve of labou r –the supply of labour to an individual employer Market-determined Wage rates and Employment

25. The supply of labour (cont.) –the market supply of a given type of labour position of the curve –number of qualified people –non-wage benefits –desirability of alternative jobs elasticity of the market supply of labour –the mobility of labour The supply of labour (cont.) –the market supply of a given type of labour position of the curve –number of qualified people –non-wage benefits –desirability of alternative jobs elasticity of the market supply of labour –the mobility of labour Market-determined Wage rates and Employment

26. The demand for labour: marginal productivity theory –the profit-maximising approach –measuring the marginal cost and revenue of labour marginal cost of labour (MC L ) the marginal revenue product of labour (MRP L ) –the profit-maximising level of employment The demand for labour: marginal productivity theory –the profit-maximising approach –measuring the marginal cost and revenue of labour marginal cost of labour (MC L ) the marginal revenue product of labour (MRP L ) –the profit-maximising level of employment Market-determined Wage rates and Employment

27. O Q of labour Output MPP L x Marginal physical product of labour curve Diminishing returns set in here

28. O £ WmWm MC L = W QeQe Q of labour MRP L The profit-maximising level of employment MRP L = MPP L × P good

29. The demand for labour: marginal productivity theory –the profit-maximising approach –measuring the marginal cost and revenue of labour marginal cost of labour (MC L ) the marginal revenue product of labour (MRP L ) –the profit-maximising level of employment –derivation of the firm's demand curve for labour The demand for labour: marginal productivity theory –the profit-maximising approach –measuring the marginal cost and revenue of labour marginal cost of labour (MC L ) the marginal revenue product of labour (MRP L ) –the profit-maximising level of employment –derivation of the firm's demand curve for labour Market-determined Wage rates and Employment

30. O Q of labour £ MRP L W1W1 MC L 1 Q1Q1 MC L 2 W2W2 MC L 3 W3W3 Q2Q2 Q3Q3 a b c Deriving the firm’s demand curve for labour Profits maximised where MRP L = MC L

31. D O Q of labour £ W1W1 MC L 1 Q1Q1 MC L 2 W2W2 MC L 3 W3W3 Q2Q2 Q3Q3 a c The MRP L curve traces out the demand curve b Deriving the firm’s demand curve for labour

32. Elasticity of demand for labour –determinants price elasticity of demand for the good ease of factor substitution elasticity of supply of complementary factors elasticity of supply of substitute factors ratio of wage costs to total costs time period Wages and profits under perfect competition Elasticity of demand for labour –determinants price elasticity of demand for the good ease of factor substitution elasticity of supply of complementary factors elasticity of supply of substitute factors ratio of wage costs to total costs time period Wages and profits under perfect competition Market-determined Wage rates and Employment

33. O MC L = W Surplus for firm Wages W QeQe Q of labour £ MRP L Wages and a firm's surplus over wages

34. Firms with Power in the Labour Market Types of labour market power –monopsony power of employers –monopoly power of trade unions Firms with monopsony power in employing labour –MC L > W Types of labour market power –monopsony power of employers –monopoly power of trade unions Firms with monopsony power in employing labour –MC L > W

35. O Q of labour £ MRP L AC L  W (supply curve) MC L Monopsony

36. Firms with Power in the Labour Market Types of labour market power –monopsony power of employers –monopoly power of trade unions Firms with monopsony power in employing labour –MC L > W –effects on wages and employment Types of labour market power –monopsony power of employers –monopoly power of trade unions Firms with monopsony power in employing labour –MC L > W –effects on wages and employment

37. O Q of labour £ MRP L AC L  W (supply curve) Q1Q1 MC L Monopsony W1W1 Q2Q2 W2W2

38. The Role of Trade Unions Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment

39. O Q of labour Q1Q1 S D £ W1W1 Monopoly union facing producers under perfect competition Monopoly union facing producers under perfect competition

40. O Q of labour Q1Q1 W1W1 S D £ W2W2 Q2Q2 Q3Q3 Monopoly union facing producers under perfect competition Monopoly union facing producers under perfect competition Unemployment

41. The Role of Trade Unions Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals

42. The Role of Trade Unions Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly

43. The Role of Trade Unions Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly –no unique equilibrium Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly –no unique equilibrium

44. The Role of Trade Unions Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly –no unique equilibrium –relationship between wages and employment Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly –no unique equilibrium –relationship between wages and employment

45. O Q of labour £ W1W1 Q1Q1 MRP L MC L 1 No union S 1 (=AC L 1 ) No union Bilateral monopoly Monopsony: no union

46. W2W2 x MC L 2 = AC L 2 O Q of labour £ W1W1 Q1Q1 MRP L MC L 1 No union S 1 (=AC L 1 ) No union Bilateral monopoly Bilateral monopoly Q3Q3

47. W2W2 x MC L 2 = AC L 2 O Q of labour £ W1W1 Q1Q1 MRP L MC L 1 Bilateral monopoly Wage can rise to W 2 with no fall in employment

48. The Role of Trade Unions Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly –no unique equilibrium –relationship between wages and employment –how a rise in wage rates could lead to an increase in employment Unions with monopoly power Unions facing competitive employers –effects of wage increases on employment –productivity deals Bilateral monopoly –no unique equilibrium –relationship between wages and employment –how a rise in wage rates could lead to an increase in employment

49. W2W2 x MC L 3 = AC L 3 O Q of labour £ W1W1 Q1Q1 MRP L MC L 1 Bilateral monopoly Wage can rise from W 1 to W 3 and employment rises to Q 2 W3W3 Q2Q2

50. The Role of Trade Unions Collective bargaining –union threats and promises –employers’ threats and promises The outcome of negotiations –power –attitudes –union's membership –scope for movement –bargaining skills –information Role of government Collective bargaining –union threats and promises –employers’ threats and promises The outcome of negotiations –power –attitudes –union's membership –scope for movement –bargaining skills –information Role of government

51. The Efficiency Wage Hypothesis Meaning of efficiency wage rates Why might higher wage rates lead to higher productivity? –less ‘shirking’ –reduced labour turnover –self-selection –morale In which parts of the labour market are efficiency wage rates likely to be paid? Meaning of efficiency wage rates Why might higher wage rates lead to higher productivity? –less ‘shirking’ –reduced labour turnover –self-selection –morale In which parts of the labour market are efficiency wage rates likely to be paid?

52. Low Pay and Discrimination Low pay –identifying workers who are low paid –evidence on low pay –the growth in low pay unemployment due to recession unemployment due to technological change the growth in part-time employment changes in labour laws Minimum wages –effects in competitive markets –effects in monopsonistic markets –evidence on the effects of a minimum wage Low pay –identifying workers who are low paid –evidence on low pay –the growth in low pay unemployment due to recession unemployment due to technological change the growth in part-time employment changes in labour laws Minimum wages –effects in competitive markets –effects in monopsonistic markets –evidence on the effects of a minimum wage

53. Low Pay and Discrimination Discrimination –types of discrimination –differences in pay not related to productivity –differences in productivity arising from discrimination in social opportunity Discrimination –types of discrimination –differences in pay not related to productivity –differences in productivity arising from discrimination in social opportunity

54. Low Pay and Discrimination Gender and the labour market –evidence on wage inequality Gender and the labour market –evidence on wage inequality

55. Average gross hourly earnings for full-time adult UK employees (pence per hour): 1970-2002 Average gross hourly earnings for full-time adult UK employees (pence per hour): 1970-2002

56. Average gross hourly earnings for full-time adult UK employees (pence per hour): 1970-2002 Average gross hourly earnings for full-time adult UK employees (pence per hour): 1970-2002

57. Average gross hourly earnings for full-time adult UK employees (pence per hour): 1970-2002 Average gross hourly earnings for full-time adult UK employees (pence per hour): 1970-2002

58. Average gross hourly earnings for full-time UK employees on adult rates (2002)

61. Low Pay and Discrimination Gender and the labour market (cont.) –causes of inequality between the sexes types of employment (including part time) career breaks differences in mobility union membership custom and practice training prejudice –effects of equal pay legislation Gender and the labour market (cont.) –causes of inequality between the sexes types of employment (including part time) career breaks differences in mobility union membership custom and practice training prejudice –effects of equal pay legislation

62. The Flexible Firm and the Market for Labour Flexible labour markets –the flexible firm functional flexibility numerical flexibility –core workers and peripheral workers –Implications for wages Flexible labour markets –the flexible firm functional flexibility numerical flexibility –core workers and peripheral workers –Implications for wages

63. The flexible firm

64. Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility The flexible firm

65. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility The flexible firm

66. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Self-employment Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility The flexible firm

67. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Self-employment Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries The flexible firm

68. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Self-employment Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

69. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Self-employment Increased outsourcing Increased outsourcing Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

70. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Second peripheral group Self-employment Increased outsourcing Increased outsourcing Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

71. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Short- term contracts Short- term contracts Second peripheral group Self-employment Increased outsourcing Increased outsourcing Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

72. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Short- term contracts Short- term contracts Public Subsidy Trainees Public Subsidy Trainees Second peripheral group Self-employment Increased outsourcing Increased outsourcing Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

73. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Short- term contracts Short- term contracts Public Subsidy Trainees Public Subsidy Trainees Delayed recruitment Delayed recruitment Second peripheral group Self-employment Increased outsourcing Increased outsourcing Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

74. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Short- term contracts Short- term contracts Public Subsidy Trainees Public Subsidy Trainees Delayed recruitment Delayed recruitment Job sharing Job sharing Second peripheral group Self-employment Increased outsourcing Increased outsourcing Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

75. First peripheral group Secondary labour market Numerical flexibility First peripheral group Secondary labour market Numerical flexibility Short- term contracts Short- term contracts Public Subsidy Trainees Public Subsidy Trainees Delayed recruitment Delayed recruitment Job sharing Job sharing Part time Part time Second peripheral group Self-employment Increased outsourcing Increased outsourcing Core group Primary labour market Functional flexibility Core group Primary labour market Functional flexibility Agency temporaries Agency temporaries Sub- contracting Sub- contracting The flexible firm

76. The Flexible Firm and the Market for Labour The Japanese model –total quality management –elimination of waste, 'just-in-time' methods –team work –functional and numerical flexibility The Japanese model –total quality management –elimination of waste, 'just-in-time' methods –team work –functional and numerical flexibility