Supply of Labour 3.5.2

What is labour supply?

Measures the hours that people are willing and able to supply at a given wage.

What is the reservation wage?

The lowest pay rate people are willing to work in an occupation.

What are non-wage factors affecting labour supply?

• Job risk

• Job security

• Career opportunities

• Ant-social hours

• Generosity of occupational pensions

• Strength of vocation

• Working conditions

• Quality of training/ professional development

• Opportunity for living and working overseas

What effects labour supply to a particular occupation or industry?

• Real wage rate and the extra pay offered

• Wages on offer in substitute occupations- an increase in pay of a job will increase the supply as it becomes more desirable

• Barriers to entry- minimum qualifications

• Improvements in the occupational mobility of labour

• Non-monetary characteristics

• Net inward migration

What might an outward shift of the labour supply curve be caused by?

• A rise in net inward migration of workers with relevant skills

• Impact of extra investment in human capital (training/ education)

• A fall in relative wages in substitute jobs

• Demographic trends- for example, an increase in the number of school and college leavers

What effects wage elasticity of labour supply?

• Nature of skills and qualifications required to work in an industry- specific skills/ qualifications = inelastic. Low skills required = elastic

• Vocational nature of work

• Time period- in short run labour supply is inelastic as it takes time to respond to wage rate changes

What are causes of occupational immobility?

• Skills gaps

• Experience gaps

• Education gaps

• Low confidence

• Training gaps

What is meant by occupational immobility?

When there are barriers to people being able to switch between one job and another

What are some causes to geographical immobility?

• Family ties

• High cost of property

• Migration controls

• Language barriers

• Access to good schools

• High cost of commuting

Which industries and occupations are dependent on net inflows of workers from overseas?

• Agriculture

• Hospitality and tourism

• Health and social care

• Construction

• Transport and logistics

What are some policies to improve geographical mobility in the UK labour market?

• Rent controls/ reforms to rental sector to improve rights of tenants including bans on no-fault evictions

• Increases in new housebuilding with legal requirements for constructing affordable homes

• Infrastructure investment to expand the transport network and possible caps on fares