6.2 The influences on the supply of labour Flashcards
What does the maket supply curve of labour showcase? Now let’s assess the monetary and non-monetary considerations household members ponder upon when deciding the amount of labour they shall supply. What are the 2 factors that influence the amount of labour workers are willing to supply?
a) How much labour they are willing to supply at different wage rates. This is similar to the market demand curve for labour which showcases the level a firm shall demand at different wage rates.
b) The first is the money wage rate being offered and the second reagrds the economic welfare derived from other aspects of working - these are non-monetary benefits e.g. job satisfaction or disatisfaction.
Different types of workers yield different amounts of job satisfaction and disatisfaction. When a worker enjoys the job they do the net advantage of working is WHAT compared to the welfare recieved by their wage? What does this mean if the money wage rate was lower? If we flip this on its head and look at production line workers who must endure heavy manual labour which is unpleasant then the supply of their labour showcases what about the money wage rate being offered?
a) Is GREATER compared to the welfare yielded by their wage.
b) If the money wage rate is lower they would still be willing to offer their labour due to the job satisfaction they recieve.
c) The wage beig offered is high enough to compensate for the intensive manual labour they must go through.
Looking at leisure time and hours of labour supplied. What does the decision to supply more labour mean simulteneously if there are only 24 hours in a day. As more labour is supplied at a particular wage rate, the extra income yields less and less extra WHAT for the worker? At which point should a worker supply their labour to in order to maximise their personal welfare/leisure time? What happens however if the wage rate increases? How is opportunity cost linked to all of this then?
a) Suppling more labour in a day means giving away more leisure time.
b) Satisfaction.
c) The point at which the welfare from the last unit of money earnt is equivalent to the the point at which the welfare from the last unit of leisure time is sacrificed - this is where the marginal private benefit equals the marginal private cost of sacrificing leisure time. If the wage rate rises however then this changes things. It incentives the individual to work more hours and sacrifice more leisure time because the welfare dervived from the wage is GREATER than the last unit of leisure time enjoyed. This is why the supply of labour goes upwards.
d) When you sacrifice leisure time for more hours of labour the opportucnity cost is your leisure time.
Assessing shifts in the market supply curve of labour. What can cause a shift of an individual’s supply of labour - changes in WHAT factors? GIve a list of the examples of this factor that can influence an individuals supply of labour. What will a deterioration in these examples mean for the supply curve of that person? What will happen to the supply labour if the individual favours leisure time? What will happen to the supply of labour if the individual decides they want to excercise more demand for goods and services?
a) Non-monetary factors. E.g. job prospects, working conditions, holiday entitlement etc. A deterioration in any of these will shift the supply of labour to the left.
b) The supply curve shal shift to the right if the individual decides to demand more goods and services.
There are 2 other factors analysed in the AQA book that impact the amount of labour supplied. They are: the changes in income and changes in population. Explain both.
a) Changes in income - The assumption is made that for most people leisure time is a NORMAL good - a normal good is a good who sees a rise in demand as income rises. For other people leisure time is an inferior good which means that as their income rises their demadn for leisure time reduces. Depending on a persons perception of leisure time sahll determine the position and amount of labour supplied.
b) Population rise - A rise in the population shall be met with an increased supply of labour. A reduction shall cause the opposite.
