Supply of Labour Flashcards
What is the supply of labour
number of workers willing and able to work at a given wage rate and how many hours they can work
Factors affecting the supply of labour
- wage rate
- demographics of population
- migration
- non pecuniary benefits
- Leisure
- Training time and qualifications
- Taxes and benefits
- Trade Unions
- Labour subsidies
How does the wage rate affect the supply of labour
Higher wage rate there will be more people willing to work and for longer hours so the supply increases, proportional relationship
How do population demographics affect the supply of labour
The more people willing to work the higher the labour supply, changes with retirement ages and schooling ages
How does migration affect the supply of labour
Supply will increase because most migrants are of working age, affects supply of labour more at lower wage rates as migrants tend to come from economies with lower average wages
How do non pecuniary benefits affect supply of labour
welfare an employee can gain from their job, so more of these like holiday entitlements, employee discounts, perks of the job, opportunities of promotion, subsidised childcare will all together increase the labour supply
How does leisure affect the supply of labour
Leisure is a substitute for work so if people prefer leisure to due to factors like age where as age increases leisure utility increases so supply of labour decreases. Other influencing factors are income tax rates, dependents, pensions
How do training times and qualifications affect the supply of labour
High training times and many qualifications needed will reduce the supply of labour for that job
—-> Governments can subsidise training
How do taxes and benefits affect the supply of labour
If income taxes are too high and benefits too generous labour supply will decrease
How do Trade Unions affect the supply of labour
A strong trade union in an industry will increase the labour supply as more people will be willing to work if they know their rights and wages will be protected
—> However can limit working hours and strike action can reduce the labour supply
How do Labour Subsidies affect the supply of labour
Labour subsidies to help workers look for work or to access training and qualifications can increase the labour supply, turns potential labour supply into actual labour supply
Actual Labour Supply
Those willing and able to supply their labour
Potential Labour Supply
Those who are inactive
What does the Backward Bending supply curve show
Workers initially will increase hours they are willing to work as their wage increases so substitute their leisure for work, eventually wage will rise to a point where the income effect takes hold as workers earn high enough wages to not have to work as many hours so they choose leisure over work as they can afford to do so.
Income Effect
An increase in income can change the consumers demand, increase in income can change demand for leisure
