0455
Labour Market: Wages & Trade Unions
Microeconomic Decision Makers · 4 question types
Exam Frequency Analysis
Past paper frequency (2018 to 2024)
This topic accounts for approximately 8% of your exam marks.
stable
Low
Stable8%
Wage determinants, minimum wage effects, and trade union impact appear regularly in Section B; typically 6 to 10 marks.
The labour market is the market in which workers (the suppliers of labour) meet firms (the buyers of labour). The "price" in this market is the wage; the "quantity" is the number of workers employed (or hours worked).
Like every other market on the syllabus, the labour market has demand and supply curves. The interaction of the two determines the equilibrium wage at which the quantity of labour demanded equals the quantity of labour supplied.
Two important differences from product markets:
- Demand for labour is derived demand. Firms do not want workers for their own sake; they want the products workers help to make. Demand for labour rises when demand for the firm's product rises.
- The supply of labour is the number of workers willing and able to work at each wage. It rises as the wage rises (higher pay attracts more workers; some take on extra hours).
A standard labour-market diagram has the wage rate on the vertical axis, the quantity of labour on the horizontal axis, a downward-sloping DL (demand for labour) curve and an upward-sloping SL (supply of labour) curve. They cross at the equilibrium wage We and quantity Qe.