Supply for Labour Flashcards
The Supply of Labour
The number of workers willing/able to work at any given wage.
The supply of labour varies by wage. More people are willing to work, for longer hours, when wage rises.
Factors that affect Supply of Labour
Education and Training - If more people are educated, workforce becomes more diverse (more labour in different markets)
Migration - If immigration is high, overall workforce increases. Depends on the economic situation or possible war.
Income tax and out of work benefits - If income tax is low, gives more incentive for people to work. This also depends on social welfare benefits.
The strength of trade union - Strong trade union that increases working conditions, then more people willing to work.
The Backward-Bending Supply Curve
https://en.wikipedia.org/wiki/Backward_bending_supply_curve_of_labour#/media/File:Labour_supply.svg
The backward bending supply curve occurs because of the intersection of income and substitution effects.
An increase in real wages means that the rewards for working, rather than not working and taking more leisure, increases.
However, work is argubly an inferior good, the higher the income, the fewer hours individuals wish to work. Therefore, the income effect of work tends to be negative for most individuals (hence the backward bending supply curve)
Supply curve of labour for an industry
http://www.digitaleconomist.org/labor_s_se.gif
Higher wage rates attract more labour to the market.
Elasticity of Supply of Labour
Responsiveness of quantity supplied of labour as a result of a change in price of labour (wage rates)
(Percentage Change in QS of labour) / (Percentage change in wage rates)
Factors that determine PES of labour
Time - PES is likely to be lower in the short run compared to the long run because, in long run, more supply will be available.
Level of unemployment - the more unemployment, the more elastic
The availability of suitable labour - If a company hires unskilled labour, the company will be able to employ from other industries, more elastic.
High skilled labour is more inelastic. This is because they are more scarce, and they are not as mobile.
Why is market failure high in the supply of labour?
Because it is often difficult to move workers in comparisons to other factors of production
The Mobility of Labour
The mobility of labour is the geographical and occupational movement of workers.
In a perfect labour market, there are no barriers to the supply of labour to any region or occupation.
In practise, there are many barriers to mobility of labour causing market failure.
Factors that cause immobility of labour
Occupational mobility - This refers to the ability of workers to transfer from one occupation to another.
Geographical immobility of labour - This is when workers find it difficult to move from one area to another. Reasons for this can include search costs, leaving friends/family etc.
Economically active
The number of workers in the workforce who are in a job or are unemployed
Population of Working Age
The size of the population aged between the school leaving age and the state retirement age.
Workforce
Those economically active and therefore in work or seeking work.
