3.5.2 Supply of labour Flashcards
What is the definition of the supply of labour
- The number of hours people are willing to and able to work at a given wage rate
Explain how an increase in wages will lead to and increase in supply
- An increase in wage rate will increase the incentive to work
What are the non wage factors which shift supply
- Non monetary rewards
- Net migration
- Changes in working conditions of other industries
- Decrease in income tax
- Trade unions
What is the definition of the elasticity of labour supply
Measures the responsiveness of labour supplied given a change in wage rate
What are the factors affecting the elasticity of supply of labour
1-Nature of the skills required in the job
2-Time period
3-Vocation
4-Length of training
Explain ‘length of training period’
- Longer training period -> people without required skills cannot supply labour as it will take them a while to become trained -> therefore only a small change in employment as wage rate increase
Explain time period
- In the short run, workers may not be able to leave their place of work due to fixed contracts or notice period, therefore an inelastic supply curve.
- In long run, they will be able to leave
What are the two types of market failure within the labour market
- Geographical immobility
- Occupational immobility
Define geographical immobility of labour
- Refers to barriers to people moving from one area to another to find work
What are some reasons geographical immobility of labour exists
- Family ties
- Financial costs of relocating, eg moving costs and removal costs
- High cost of rent in another location
Define occupational immobility of labour
- The inability of workers being able to switch jobs due to a lack of transferable skills
What are some causes of occupational immobility of labour
-Skill gaps
-Training gaps
-Experiece gaps as a result of structural unemployment
-Confidence and motivation
