3.5 the labour market 3.5.2 supply of labour Flashcards
what does the supply of labour curve show
the supply of labour curve shows the willingness and ability of people to make themselves available to work at different wage rates
what are the 7 factors which influence the supply of labour
-wages
-population and distribution of age
-non-monetary beenfits
-education/training/qualification
-trade unions and barriers to entry
-wages and conditions of other jobs
-legislation
how do wages affect the supply of labour
how does the population and distribution age affect the suply of labour
how do non-monetary benefits affect the supply of labour
how does education/training/qualifications affect the supply of labour
wages:
-an increase in the wage rate, will lead to an increase in the supply of labour and hours worked ,as although it may not increase the hours worked by existing labour (due to the individal supply of labour curve/ backward bending) it will allow new workers to be hired from other jobs / or the unemployed as it pays more.
population and distribution of age:
-a higher population will lead to a greater supply of labour, the distribution of age is also important, if the working population is great and the dependency ratio is low, a demographic dividend may be achived. Migration plays a key role in determining workforce, since many migrants fo working age come to the UK
non-monetary benefits:
-supply of labour will increase if there is hgih job satisfaction. some jobs are attractive ebacuse they are close or in an area with a good social life (e.g. london), some offer free private healthcare, holidays hours of work flexibility etc
education/training/qualifications:
-more educated workers means there is a higher supply of workers. This is more important in industires that require qualifications (e.g. accountancy)
-occupatons which require a high level of education may suffer from lower supply of labour compared to low skilled jobs
how do trade unions and barriers to entry affect the supply of labour
how do wages and conditions of other jobs affect the supply of labour
how does legislation affect the supply of labour
trade unions:
-trade unions may be able to restrict the supply of labour by introducing barriers to entry, e.g. in order to become a teacher you must have a degree
-they may also negotiate hgher wages, this will increase the supply of labour into the industry, howeever if wages become too high, firms will begin to fire some workers, causing a decrease in the supply
-they may make the working conditions better and more safe, this will attract new workers, increasing the supplyof labour.
wages and conditions of other jobs:
-if many of the jobs in the local area are considered to be unpleasant and offer low wages, then supply for alternatives will be higher.
Legislation:
-government legislation can affect the supply of labour, e.g school leaving age and the retirement age, e.g anti-natal policies.
Market failure:
what is the market failure in the labour market caused by
-occupational immobility
-geographical immobility
Market failure:
Labour can suffer from either occupation immobility or geographical immobility
-what is meant occupational immobility, what is it like in the short/long run
-what is meant by geographical immobility
-what is the link between immobility and excess supply/demand
occupational immobility:
-this is where workers find it hard to move from one job to another due to a lack of transferrable skills.
-it is particularly difficult in the short-term when workers need to get new training, but in the long run it may only be possible at a high cost/ long amount of time
geographical immobility:
-thi is where workers find it difficult to travel from one place to another due to the cost of movement, or family etc. housing is also a big issue, some people may not be able to afford the living costs in those areas.
-immobility can mean that there is excess supply of labour in one area/occupation whilst there s excess demand in another.
-even if wages were higher where there is excess demand, people will be unable to leave where there is excess supply to get a job in that area/occupation beacuase oft their immobility
Market failure:
-what does the uk labour market suffer from
-how much could this cost them per year post brexit
-how many too few high skilled people are there
-how many too many low skilled people are there
-what industry is struggling in particular
-the uk labour market sffers from a severe skills shortage
-it could cost the UK £90bn per year
-4 million too few high skilled workers
-6 million too many low skilled workers
-the engineering industry is struggling in particular
PES of labour:
what is meant by the PES of labour
what are the 3 factors which will affect the PES of labour
-the responsiveness of supply to a change in the wage rates
PES determinants:
-the level of education/qualifications and training of labour
-the availability of suitable labour in other industries
-time
PES of labour:
how does the level of qualifications and training affect the PES of labour
how does the availability of suitable labour in other industries affect the PES of labour
how does time affect the PES of labour
level of qualification/education and training:
-the elasticity of the supply of labour will depend on the level of qualifications and training since if there is a high level of qualifications necessary for a job, people will not be easily able to take up the job, so the supply of labour will be inelastic
availibility of the suitable labour in other industries:
-if a company can ‘poach’ workers from other industries, then the elasticity of the supply for labour will be more elastic
time
-in the long run supply of labour will be more elastic as people have the time to train.
-if the job is vocational (if people love their job) , then the supply will be inelastic, as even if the wage rate does fall, supply will remain the same and people wont leave that job
synoptic point:
how can government spending and taxation also affect the supply of labour
how will high levels of unemploymet affect the elasticity of supply
-high tax rates and high welfare benefits can reduce incentives to work and means that there is a lower supply of labour. this affects the entire workforce, so therefore will have an impact on individua occupations
-high levels of unemployment will make supply more elastic as a firm can increase the number of people it employs without having to increase wage rates significantly.
