Labour market forces and intervention
| English | Chinese | Pinyin |
|---|---|---|
| minimum wage | 最低工资 | zuì dī gōng zī |
| price floor | 价格下限 | jià gé xià xiàn |
| surplus of labour | 劳动力过剩 | láo dòng lì guò shèng |
| monopsony | 买方垄断 | mǎi fāng lǒng duàn |
| trade unions | 工会 | gōng huì |
| elastic | 富有弹性 | fù yǒu tán xìng |
When the labour market is interfered with
- Left alone, the labour market sets a wage — but governments impose minimum wages 最低工资, unions push for more, and some employers hold all the power.
- These forces push wages away from the free-market level, for better or worse.
A minimum wage set above the equilibrium wage can cause:
A binding price floor leaves quantity supplied above quantity demanded — excess labour.
A minimum wage is a price ______ in the labour market.
It sets a legal minimum (a floor) below which wages cannot fall.
Minimum wage
- A minimum wage is a price floor 价格下限 in the labour market: set above equilibrium, it raises pay for those in work.
- But it can cause a surplus of labour 劳动力过剩 (unemployment) if set too high — the classic trade-off.
A minimum wage above equilibrium lifts pay but can leave more workers seeking jobs than firms want — a surplus.
The labour market
Wages are a price too: the demand for labour meets its supply to set the wage and employment — a minimum wage or union can shift it.
A monopsony in the labour market is a single dominant:
A monopsony is one big employer; it can push wages below the competitive level.
Trade unions use collective bargaining to try to raise wages and improve conditions.
Unions bargain on behalf of members for better pay and conditions.
Unions and monopsony 买方垄断
- Trade unions 工会 bargain collectively to raise wages and improve conditions.
- A monopsony is a single dominant buyer of labour (e.g. the only big employer in a town), which can push wages below the competitive level.
- A union facing a monopsony can sometimes raise wages without cutting jobs.
A competitive labour market sets the wage where demand meets supply
A minimum wage causes less unemployment when labour demand is:
Inelastic labour demand means firms cut few jobs when the wage rises.
Evaluating intervention
- Minimum wages reduce poverty and exploitation but risk unemployment; their effect depends on how elastic 富有弹性 labour demand is.
A minimum wage is a price floor. It only bites when set above the equilibrium wage; below it, the market wage already exceeds the minimum and nothing changes.
You've got it
- a minimum wage (price floor above equilibrium) raises pay but can cause a labour surplus
- trade unions bargain for higher wages; a monopsony (sole buyer) pushes wages down
- the employment effect depends on the elasticity of labour demand