WEEK 7
Labour Markets
Labour Market Outcomes
You will learn about:
Differences in incomes from work
You will learn to:
Examine economic issues
Apply economic skills
Differences in incomes from work
- wage outcomes for all persons by income groups, occupational groups, age, gender and cultural background
- trends in the distribution of income from work over time
- non-wage outcomes for different occupations
- arguments for and against a more equitable distribution of income from work
You will learn to:
Examine economic issues
- analyse the factors that create differences in incomes from work
- compare and contrast wage and non-wage outcomes for individuals in different occupational groups
- examine the relationship between work and the quality of life
- analyse the arguments for and against a more equitable distribution of income from work
Apply economic skills
- compare and contrast the labour market with product markets
What are labor market outcomes?
Labour market outcomes describe the performance of the labour market, specifically the general level of wages and employment and where people are working and if this is a fair distribution.
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FOCUSDistinguish between wage and non-wage outcomes and discuss changes in weekly work hours in Australia. You will be writing an extended response (400-600 words) that addresses this question.
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Your answer will be assessed on how well you:
▪ demonstrate knowledge and understanding relevant to the question.
▪ apply relevant economic information, terms, concepts, relationships and theory.
▪ present a sustained, logical and cohesive response.
▪ demonstrate knowledge and understanding relevant to the question.
▪ apply relevant economic information, terms, concepts, relationships and theory.
▪ present a sustained, logical and cohesive response.
What is ‘the labor market’?
Reference: https://www.ecnmy.org/learn/your-livelihood/why-do-we-go-to-work/what-is-the-labor-market/
What's the reality?
Economists talk about the world of work as the ‘labor market’, or the supply of and demand for work by people in the economy. As soon as we start working, we ‘enter the labor market’, either as an individual offering skills or as an employer seeking them. The relative number of job seekers vs available work—the supply of labor and the demand for labor—determines how much people get paid for their work, or their wages.
So why do we ‘enter the labor market’ in the first place? A big assumption in a lot of simple labor market models is that individuals are motivated to work by money. In theory, we’d love to sit around all day and have fun, but because we need to buy things to live, we spend some time working to earn the money we need. By this logic, the way we decide how much we want to work is by weighing up how valuable our time off is compared to how much money we would make working.
If that’s true, then the more money we earn, the bigger the loss we make for every hour not spent working. People with lower wages aren’t missing out on as much money when they take time off, so they will probably want to work less. If your wage goes up, this model predicts you’ll want to work more, as your leisure time just got more expensive.
Because the labor market is controlled by supply and demand, everyone should always be able to work as many hours as they want. If you want more money, you can always work more for a lower wage. In this sense, by picking how much they work, workers get to determine their income within the limits of the kind of jobs they’re able to do and the number of hours they can physically work.
Some parts of this story clearly don’t match up to the real world. A lot of people want to work but can’t. And a lot of people go to work for reasons other than money. So while these simplified models help make economists’ jobs easier, they’re not always the most useful way to think about the real ‘labor market’ we live in.
What's the reality?
Economists talk about the world of work as the ‘labor market’, or the supply of and demand for work by people in the economy. As soon as we start working, we ‘enter the labor market’, either as an individual offering skills or as an employer seeking them. The relative number of job seekers vs available work—the supply of labor and the demand for labor—determines how much people get paid for their work, or their wages.
So why do we ‘enter the labor market’ in the first place? A big assumption in a lot of simple labor market models is that individuals are motivated to work by money. In theory, we’d love to sit around all day and have fun, but because we need to buy things to live, we spend some time working to earn the money we need. By this logic, the way we decide how much we want to work is by weighing up how valuable our time off is compared to how much money we would make working.
If that’s true, then the more money we earn, the bigger the loss we make for every hour not spent working. People with lower wages aren’t missing out on as much money when they take time off, so they will probably want to work less. If your wage goes up, this model predicts you’ll want to work more, as your leisure time just got more expensive.
Because the labor market is controlled by supply and demand, everyone should always be able to work as many hours as they want. If you want more money, you can always work more for a lower wage. In this sense, by picking how much they work, workers get to determine their income within the limits of the kind of jobs they’re able to do and the number of hours they can physically work.
Some parts of this story clearly don’t match up to the real world. A lot of people want to work but can’t. And a lot of people go to work for reasons other than money. So while these simplified models help make economists’ jobs easier, they’re not always the most useful way to think about the real ‘labor market’ we live in.
What causes differences in incomes?
Analyse the factors that create differences in incomes from work
Watch the relevant sections of this 14:59 min YouTube clip and then discuss:
"What causes differences in incomes?"
Should we have a basic universal income?
Create a mindmap outlining reasons people are paid differently. You can start with: occupational groups, age, gender and cultural background.
What is the economics behind the labor market’?
Compare and contrast wage and non-wage outcomes for individuals in different occupational groups
Watch these two clips that explore reasons for why wages are different in different occupations.
Let's look at compensating wage differentials in action. Imagine two different job profiles that hold skill and education levels relatively constant but vary in job benefits (i.e., one is clearly better in the nonwage benefits such as safety, flexible work schedule, good work environment, prestige, etc).
Let's switch it up and vary salaries until there is roughly an even number of students selecting each job. What will you give up?
- Customs officer
- Road crew for famous touring acts
Let's switch it up and vary salaries until there is roughly an even number of students selecting each job. What will you give up?
Read one of these stories and then add your voice to the padlet :
Why do we work so hard?
Examine the relationship between work and the quality of life
Core-econ.org (click on the image to go to the source)
Over the last few decades the average number of hours worked by employed Australians has actually decreased. Across the 1980s, we were working on average almost 35 hours per week (34.8 hours), but over the first decade of the 2000s, the average work week decreased to 33 hours.
Think like an Economist
Dig deeper, find out why hours worked by employed Australians have decreased overtime using the ABS data. Just click on the image to uncover the truth. When you think you know the real reason, write it in the mentimeter below.