Labour supply Flashcards
Labour supply
Measures the hours people are willing and able to supply at a given wage rate
Labour supply curve
The labour supply curve for any industry or occupation will usually be upwards sloping. This is because, as wages rise, other workers enter this industry attracted by the incentive of higher pay. The extent to which a rise in the prevailing wage or salary in an occupation leads to an expansion in the supply of labour depends on the elasticity of labour supply
Reservation wage
The lowest pay rate at which people are willing to work in an occupation
Factors impacting labour supply to an occupation or industry
- Barriers to entry: Artificial limits to an industry’s labour supply(minimum qualifications needed) can restrict supply and increase wages.
- Wages on offer on substitute occupations e.g. an increase in the earnings for plumbers and electricians may cause people to switch their jobs
- Improvements in the occupational mobility of labour as a result of expansion of apprenticeships and other types of work experience - increases numbers who can work in each job
Non-wage factors affecting labour supply
- Job risk and job security
- Working conditions
- Opportunity for living and working overseas
What might an outwight shift of labour supply be caused by:
- A rise in net inward migration of workers with relevant skills to this occupation.
- A fall in relative wages in substitute(alternative) jobs.
- Demographic trends e.g. an increase in the number of school and college leavers
Factors impacting the wage elasticity of labour supply
Depends on the nature of skills and qualifications required to work in an industry:
1. Specific skills and educational requirements make supply inelastic. Length and costly training periods make supply inelastic.
2. When the minimum skill factor needed is relatively low, then the pool of available labour will be large, making labour supply elastic. However, where jobs require specific skills and training, the labour supply will be more inelastic.
3. Time period:
In the short run, labour supply tends to be inelastic, because it takes time for people to respond to changes in relative wages and earnings.
Occupational immobility
Occupational immobility occurs when there are barriers to people being able to switch between one job and another.
Causes of occupational immobility
Skills gaps: New jobs may require different skills from those that unemployed workers can offer. The pattern of jobs evolves.
Training gaps: Unemployed workers may not have access to affordable training schemes that would allow them to improve their human capital and improve employability.
Low confidence and motivation: The longer someone is unemployed, the harder it is to find work. Skills decline, and so does the confidence and motivation to look for a job.
Structural unemployment -
When the jobs employees have disappear, leaving employees structurally unemployed e.g. manufacturers in Luton making Vauxhall vans can’t find a new job the next month: need to retrain and find new skills to make them employable in another occupation
What are degree apprenticeships?
Degree apprenticeships in the UK are higher education courses which combine working with part-time study: courses can be taken at degree level or master’s level and courses take between three or six years to complete.
Advantages of degree apprenticeships
Apprenticeships are employed throughout the course.
Degree apprenticeships have several advantages over a standard degree: students benefit by getting a degree without debt, earning while learning and gaining relevant work experience.
Employers benefit from co-designing courses to meet their needs and by the creation of a pool of work ready future employees.
Businesses in the UK offering degree apprenticeships include Sky, BAE systems, BT and Astrazeneca.
Industries and occupations in the UK which are highly dependent on net inflows of workers from overseas:
Agriculture
Hospitality and tourism
Health and social care
Changing labour market dynamics
Labour market dynamics can change over time due to factors like changes in immigration policies and global events e.g. Brexit, the Covid-19 pandemic
Labour shortages in the UK
Recently, many countries have experienced labour shortages.
This has happened across many occupations.
Skilled workers have become scarce.
Labour shortages can lead to a rise in wages
Businesses are struggling to recruit and retain people
Causes of geographical immobility in the UK Labour market
1) Housing costs: Moving to a new area can be expensive, especially if workers must buy a new home. Rents are high in many towns and cities often take up a high percentage of disposable income.
2) Other living costs: The cost of living varies significantly from one area to another. This includes the costs of commuting, childcare expenses and food prices. A study by the Institute for Fiscal Studies has found the cost of moving to a new area can be up to £10,000.
3) Family and social ties: Workers may be reluctant to move away from families and friends. A study by the Joseph Rowntree Foundation found only 1 in 5 unemployed people are willing to move to find a job.
Policies to improve geographical mobility in the UK Labour market
1) Rent controls/reforms to rental sector to improve rights of tenants, including ban on no-fault evictions.
2) Increases in new house building with legal requirements for constructing affordable homes.
3) Infrastructure investment to expand the transport network and possible caps on fares
