3.5.2- Supply Of Labour UNFINISHED Flashcards
What is supply of labour?
The total hours that workers wish to work at a given real wage rate
Why is the labour supply curve upward sloping?
As wages rise, other workers enter the industry incentivised by higher rewards
What are the factors affecting labour supply?
-wage rate
-demographic changes
-non monetary benefits
-education and training
-trade unions and barriers to entry
-expectations
-taxation and benefits
-legislation
-opportunity cost of leisure
Why does wage rate affect labour supply?
At first, an increase in the wage rate leads to an increase in hours worked, but at a certain point it will lead to a decrease in hours workers as they desire more leisure time
Why do demographic changes affect labour supply?
-a higher population means there is a large supply of labour
-age distribution determined the number of people of working age
-influenced by net migration
What is an example of net migration affecting labour supply?
The UK’s exit from the EU has resulted in a shortage of workers to pick fruit and vegetables because farm workers from Eastern Europe can’t enter the UK
Why do non monetary benefits affect labour supply?
-high job satisfaction increases supply of labour
-can be close by so requires little commuting
-some offer perks like healthcare
-impacted by flexibility, hours, holiday, and opportunities for promotion
Why do education and training affect labour supply?
-if a lot of training is required supply will fall
-if the gov subsidises training, it is easier for workers to gain the necessary skills
Why do trade unions and barriers to entry affect labour supply?
-could attract workers as they know their employment rights will be defended
-however trade unions may be able to restrict the supply of labour by introducing barriers to entry
Why do expectations affect labour supply?
-if workers believe that pensions are low, they will continue working until it is high again
-if workers believe a recession is coming they will work lots to save money
Why does tax and benefits affect labour supply?
-if taxes and benefits are too high people will be more inclined to withdraw from the labour market
Why does legislation affect labour supply?
-gov can implement rules for training and entry standards
-can implement rules that affect the supply of labour, for ex, school leaving age and retirement age
Why does opportunity cost of leisure affect the supply of labour?
-there is a trade off between work and leisure time so firms have to offer higher wages to incentivise working more hours
What is occupational immobility of labour?
Unemployment due to a lack of transferable skills
What is geographical immobility of labour?
Unemployment as it’s hard to move to find work due to family ties, cost of travel or cost of accommodation
