Supply of Labour Flashcards

1
Q

What is the supply of labour

A

number of workers willing and able to work at a given wage rate and how many hours they can work

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2
Q

Factors affecting the supply of labour

A
  • wage rate
  • demographics of population
  • migration
  • non pecuniary benefits
  • Leisure
  • Training time and qualifications
  • Taxes and benefits
  • Trade Unions
  • Labour subsidies
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3
Q

How does the wage rate affect the supply of labour

A

Higher wage rate there will be more people willing to work and for longer hours so the supply increases, proportional relationship

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4
Q

How do population demographics affect the supply of labour

A

The more people willing to work the higher the labour supply, changes with retirement ages and schooling ages

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5
Q

How does migration affect the supply of labour

A

Supply will increase because most migrants are of working age, affects supply of labour more at lower wage rates as migrants tend to come from economies with lower average wages

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6
Q

How do non pecuniary benefits affect supply of labour

A

welfare an employee can gain from their job, so more of these like holiday entitlements, employee discounts, perks of the job, opportunities of promotion, subsidised childcare will all together increase the labour supply

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7
Q

How does leisure affect the supply of labour

A

Leisure is a substitute for work so if people prefer leisure to due to factors like age where as age increases leisure utility increases so supply of labour decreases. Other influencing factors are income tax rates, dependents, pensions

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8
Q

How do training times and qualifications affect the supply of labour

A

High training times and many qualifications needed will reduce the supply of labour for that job
—-> Governments can subsidise training

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9
Q

How do taxes and benefits affect the supply of labour

A

If income taxes are too high and benefits too generous labour supply will decrease

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10
Q

How do Trade Unions affect the supply of labour

A

A strong trade union in an industry will increase the labour supply as more people will be willing to work if they know their rights and wages will be protected
—> However can limit working hours and strike action can reduce the labour supply

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11
Q

How do Labour Subsidies affect the supply of labour

A

Labour subsidies to help workers look for work or to access training and qualifications can increase the labour supply, turns potential labour supply into actual labour supply

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12
Q

Actual Labour Supply

A

Those willing and able to supply their labour

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13
Q

Potential Labour Supply

A

Those who are inactive

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14
Q

What does the Backward Bending supply curve show

A

Workers initially will increase hours they are willing to work as their wage increases so substitute their leisure for work, eventually wage will rise to a point where the income effect takes hold as workers earn high enough wages to not have to work as many hours so they choose leisure over work as they can afford to do so.

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15
Q

Income Effect

A

An increase in income can change the consumers demand, increase in income can change demand for leisure

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16
Q

Substitution Effect

A

As the wage rate rises workers are willing to work more hours and substitute their leisure

17
Q

Occupational Immobility

A

Obstacles which prevent the labour supply changing their use, lack of education skills and training can cause this, as well as some jobs having very high training and qualification barriers
–> Makes the labour supply more inelastic as workers can’t transfer to another industry if its wages rise

18
Q

Geographical Immobility

A

Obstacles which prevent labour from moving to different areas. Caused by lack of transport, high costs of moving, family ties, regional house price variation.
–> Makes labour supply more inelastic as workers can’t move to areas with higher wages

19
Q

What makes labour supply inelastic

A
  • High skilled workers as there are fewer
  • High training and qualification times
  • Jobs with non financial rewards
  • Short run
20
Q

What makes labour supply elastic

A
  • Lower skilled workers as there are more
  • Long run
  • low training times