Economics and Accounting for the Real World
Part A: Theory of demand for and supply of labour
The economic concept of "demand for and supply of
labour" is a fundamental one that serves to explain the market dynamics of
the labour market (Barash and Petrova, 2022). This theory is based on the
observation that there is always a demand for and supply of labour. The
interaction that occurs between workers and employers is referred to as the
labour market. This interaction occurs when workers supply their labour
services and employers demand them (Narazani, 2011).
Determinants of Labour Demand
- Product demand: Labour demand is ultimately determined by the demand for the goods or services produced by employees. When product demand rises, businesses must recruit additional people to keep up (Narazani, 2011).
- Technological advancements: Advances in technology might cause a shift in labour demand. Increased automation, for example, can lessen the demand for manual labour (Narazani, 2011).
- Input prices: Changes in input prices, like as raw materials or energy, can have an impact on labour demand. A rise in the cost of raw materials, for example, can reduce the demand for workers in that industry (Barash and Petrova, 2022).
Determinants of Labour Supply
- Population: The size and age structure of the population can have an impact on labour supply. A larger population can increase labour supply, whereas an ageing population can decrease labour supply (Barash and Petrova, 2022).
- Education and training: The quality and quantity of labour supplied are affected by the degree of education and training. Highly skilled workers may usually earn greater compensation (Narazani, 2011).
- Opportunity cost: The opportunity cost of employment has an impact on the supply of labour. Workers may opt to work less if the salary rate is lower than the opportunity cost of leisure time (Narazani, 2011).
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| Economics and Accounting for the Real World |
Part B: The Application
i) Description of the concepts
Economically active: Economically active people are those between the ages of 16 and 64 who are either currently working or actively looking for work. This includes people who are unemployed but are actively looking for work, as well as people who have jobs but may be looking for something different or more (Brucker Juricic, Galic and Marenjak, 2021).
In employment: In employment, this term refers to people who are currently working and getting paid for it. This includes full-time jobs, part-time jobs, and working for themselves (Lauder and Mayhew, 2020).
Economically inactive: Economically inactive people are those who are of working age but are neither working nor looking for work. People who are retired, in school, taking care of family, or have given up looking for work are in this group (Gandini, 2018).
Unemployed: People who are of working age and are looking for work but don't have a job at the moment. To be considered unemployed, a person must be actively looking for work and ready to work (Usanov and Usanov, 2019).
Table 1: Labour supply (July 2021 to June 2022)
The table shows the labour supply for the City of Bristol, including the number of individuals in different categories: economically active, in employment, economically inactive, and unemployed.
|
Labour supply type |
City of Bristol (no.s) |
City of Bristol (%) |
The south-west (%) |
Great Britain (%) |
|
Economically active |
275,000 |
83.6 |
80.3 |
78.4 |
|
In employment |
268,300 |
81.6 |
78.1 |
75.5 |
|
Economically inactive |
77,400 |
19.6 |
20.4 |
19.2 |
|
Unemployed |
8,600 |
3.1 |
2.7 |
3.7 |
The table shows the labour demand for the City of Bristol,
including the total number of full-time employee jobs, the percentage of
full-time employee jobs in the city, the weekly pay, and the hourly pay.
|
Labour demand |
City of Bristol (no.s) |
City of Bristol (%) |
Southwest (%) |
Great Britain (%) |
|
Total full-time employee jobs |
323,000 |
0.99 |
0.87 |
0.85 |
|
Weekly pay (£) |
- |
670.8 |
611.3 |
642.0 |
|
Hourly pay (£) |
- |
17.48 |
15.44 |
16.37 |
ii) Short report about the Bristol labour market
Bristol, in the south-west of England, has a very active and dynamic job market, as evidenced by the labour supply and demand statistics below. The city has a higher percentage of economically active people than the south-west and the United Kingdom as a whole, with 83.6% of the population being economically active, compared to 80.3% and 78.4%, respectively (Bdaily, 2019).
In terms of employment, 81.6% of Bristol's population is employed, compared to 78.1% and 75.5% of the south-west and Great Britain populations, respectively. This suggests that there is a strong demand for employees in the city, which is reinforced by the fact that 99% of all employee positions in Bristol are full-time, compared to 87% and 85% in the south-west and Great Britain, respectively. Bristol has a total of 323,000 full-time employee jobs (Nomisweb, 2021).
Despite the great need for labour, there are some people in Bristol who are economically inactive, accounting for 19.6% of the population. This is, however, less than the percentages of economically inactive persons in the south-west and the United Kingdom, which are 20.4% and 19.2%, respectively. Furthermore, Bristol has a low unemployment rate, with only 3.1% of the population unemployed, compared to 2.7% and 3.7% in the south-west and Great Britain, respectively (Nomisweb, 2021a).
Bristol's average weekly wage is £670.8, which is greater than both the south-west (£611.3) and the United Kingdom (£642.0). Bristol's average hourly pay is also greater than that of the south-west and Great Britain, with £17.48 vs £15.44 and £16.37, respectively. This implies that employees in Bristol are well compensated, despite the cost of living in the city may be greater than in other locations (O’Connor, 2017).
Part C: Policy
i) The Gig Economy
The gig economy refers to a growing trend of short-term,
freelance or temporary jobs that are typically arranged through digital
platforms, such as Uber, Deliveroo, and Airbnb. This type of work is considered
to be part of a growing economic trend. These positions are commonly filled by
employees who have many jobs or who are seeking part-time or casual work
because of their flexibility and lack of job security. These jobs are
distinguished by their flexibility and lack of job security (Durazzi, 2018).
The Office for National Statistics published a study stating
that there has been expansion of the gig economy in the United Kingdom during
the past several years. It is projected that there were 4.7 million people
working independently in the UK in 2018, and a sizeable part of those people
are expected to be employed in the gig economy. In addition, the survey
discovered that the number of people working in the gig economy rose by 43
percent between the years of 2010 and 2018 (Shapiro, 2020).
ii) Write out three economic advantages and three disadvantages of the existence and expansion of the gig economy in UK labour markets
The Gig economy has versatile advantages and disadvantages
on the UK labour market. 3 of each of them has been described in the following.
Economic advantages of the gig economy in UK labour markets:
- Increased flexibility for workers: The gig economy gives workers more freedom to choose when and where they work, which enables them to better juggle their work responsibilities with their other obligations, such as caring for children or attending school (Green and Henseke, 2021).
- Increased job opportunities: The gig economy creates new job opportunities for individuals who may not be able to access traditional employment due to a lack of qualifications or experience (Green and Henseke, 2021).
- Improved efficiency and cost savings for businesses: Businesses that participate in the gig economy have access to a larger pool of talent and resources, which enables them to function more efficiently and with lower overhead costs (Green and Henseke, 2021).
Economic disadvantages of the gig economy in UK labour
markets:
- Lack of job security: Workers in the gig economy frequently do not have job security because they are not entitled to the same employment rights and benefits as traditional employee (Usanov and Usanov, 2019).
- Lower wages and income volatility: Many workers in the gig economy receive lower wages and are subject to more unpredictable incomes, which can make it difficult for them to plan for the future and save money (Usanov and Usanov, 2019).
- Limited access to benefits: Workers in the gig economy typically does not have access to traditional employment benefits like sick pay, holiday pay, or pensions, which can leave them financially vulnerable in times of need (Usanov and Usanov, 2019).
Overall, the gig economy is a developing trend in the labour market in the UK, but it comes with both advantages and downsides for those who participate in it. It is essential to make certain that employees in the gig economy are not abused and that they have access to employment benefits and protections, despite the fact that the flexibility and creativity offered by the gig economy might be advantageous.