An Introduction to the Labour Market (Edexcel IGCSE Economics)

Labour costs often represent one of the most significant business costs

If firms can lower their labour costs, they will be able to generate higher levels of profit

• Labour costs can be lowered by increasing the productivity of workers, or by reducing wages and salaries

Quality of labour refers to the skills, knowledge and expertise of workers

• The greater the quality of labour, the greater the potential productivity for the business

• E.g. Tech multinationals Google, Facebook, and Microsoft have all located in close proximity to universities of Paris (École Polytechnique, Sorbonne University, and Sciences Po) to access highly skilled workers

Quantity of labour refers to the number of available workers to the business

• E.g. Multinational companies may set up production operations in countries like Bangladesh or Vietnam due to the large labour force availability at low wages

Education occurs in schools and universities and may be funded by the government, or may be run by private educational firms in some economies

Training is undertaken by firms, and can shape the skills and knowledge of human capital and the quality of labour

• More skilled workers can drive innovation, creating a competitive advantage for businesses

In countries like Sweden and Denmark, where university education is free, firms benefit from reduced training costs for some specialist workers

• E.g. Ireland's investment in education, particularly in the sciences, has attracted major pharmaceutical companies like Pfizer and Abbott Laboratories. These companies have access to labour that can specialise in research or production

Some countries invest less in education, which puts the burden on business to spend more on education and training

• This creates higher costs for firms, however workers are trained in specific skills

  • E.g. Businesses like Tesla value training programs to nurture employee expertise

Businesses whose sole focus is on short term profit may not prioritise investing in education or training programs