Ii Handout 14 - Labour Markets
Micro 14 - Labour Markets
Up until now we've looked at the product market. We will now analyse the labour market and factors
affecting the supply and demand of labour. This is known as a factor market.
The role of the labour market is to enable workers who are willing and able to sell their labour to meet
employers who are willing and able to offer them a job.
It is important to remember that the supply of labour in this market comes from bo.2:t:rold ~ and
the demand for labour from b<:00':! .
Before we move on, we must make clear the difference between wage and salary
Definition: Wage
l\n \r\cuc ~ ocf\<X.){\ \- pOA cl tO a 0v or \Q_Q__r , n orm a.U j p ru d
wee~~-
Definition: Salary
4\i\ OS(\ ciun t pajcl. l o a
0 ~ +n.o_ (___,~~ ~
When you start working, you will end up paying some of the money earned in taxes. This is what happens
in developed countries that have the mean~ to collect tax. In the UK you also end up paying something
called NationalJnsuraacel Both taxeSj and NI are also known as deductionJ. There are four main deductions
that you need to be aware of. These include:
~
, Handou t 14 - Labour Markets
The table below summarises the differen t tax rates in the UK and the point at which you start paying taxes.
Tax band Tax rate Taxable income
Personal allowan ce 0%
Basic rate 20% 0
Higher rate 40% I I 0
Additio nal rate ; 45% :
For a person on a salary of £20,000, they will not pay any tax on the first fil'.jj'~ This is known as the tax
free allowance or the personal allowance. It goes up every year to encourage more people into the labour
force. The next £8150 is taxed at the basic rate of 20%.
Micro 14 - Labour Markets
Up until now we've looked at the product market. We will now analyse the labour market and factors
affecting the supply and demand of labour. This is known as a factor market.
The role of the labour market is to enable workers who are willing and able to sell their labour to meet
employers who are willing and able to offer them a job.
It is important to remember that the supply of labour in this market comes from bo.2:t:rold ~ and
the demand for labour from b<:00':! .
Before we move on, we must make clear the difference between wage and salary
Definition: Wage
l\n \r\cuc ~ ocf\<X.){\ \- pOA cl tO a 0v or \Q_Q__r , n orm a.U j p ru d
wee~~-
Definition: Salary
4\i\ OS(\ ciun t pajcl. l o a
0 ~ +n.o_ (___,~~ ~
When you start working, you will end up paying some of the money earned in taxes. This is what happens
in developed countries that have the mean~ to collect tax. In the UK you also end up paying something
called NationalJnsuraacel Both taxeSj and NI are also known as deductionJ. There are four main deductions
that you need to be aware of. These include:
~
, Handou t 14 - Labour Markets
The table below summarises the differen t tax rates in the UK and the point at which you start paying taxes.
Tax band Tax rate Taxable income
Personal allowan ce 0%
Basic rate 20% 0
Higher rate 40% I I 0
Additio nal rate ; 45% :
For a person on a salary of £20,000, they will not pay any tax on the first fil'.jj'~ This is known as the tax
free allowance or the personal allowance. It goes up every year to encourage more people into the labour
force. The next £8150 is taxed at the basic rate of 20%.
