Predictions and exam chat for Edexcel (A) A level Economics 20th/23rd May 2019Watch
Evaluate the factors that determine wages in competitive and non-competitive labour markets.
Heya so for non competitive ( perfect competition ) labour markets I’d start off by saying that firms in this market are wage takers. They do not control the price they charge for wages, it is purely determined by where demand intersects supply. They hire workers up until where the MRP=Wage= marginal cost of labour. I would then draw a diagram for this and prehaps go on to explain what would happen if firms in a perfectly competitive market didn’t do this. I’d also mention how in this market, it is assumed workers have perfect mobility and are all homogenous. In my evaluation I’d go onto to critique this model, and how it basically just does not exist as people don’t have perfect occupational and geographical mobility. In the imperfect labour market, I’d talk about monopsony in the labour market, where there is only buyer of labour in the market. Like the market, a increase in wages for one increase wages for all and so the MC curve is twice as steep as the AC curve. There will therefore lower the quantity they employee and use lower wages ( as wage makers ) and say how this will be below the wage rate in the perfectly competitive market. In Other imperfect labour markets again wages will not be determined by where demand intersects supply. It will be based on a individuals diffrent MRP and supplies of labour. If labour supply is more inelastic due to greater skill set required for job wages are going to be higher. I’d mention how there is a 75% pay gap between those at uni and gcse level looking for a job. Wages may also be determined through discrimination, e.g, gender wage gap. I’d then go onto evaluate it say however their are laws such as equal pay act and minimum wage that restrict the extent to which these firms can determine and exploit wages. Hope this helps!,