5.2 Supply of labour

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Last updated 7:49 PM on 9/12/26
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10 Terms

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Supply of labour

The number of hours workers are willing and able to supply at a given wage rate

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The wage elasticity of the supply of labour

The responsiveness of the supply of labour to a change in the wage rate

<p>The responsiveness of the supply of labour to a change in the wage rate</p>
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Labour supply curve

The labour supply curve for any industry or occupation will be upward sloping.

As wages rise, other workers enter this industry attracted by the incentive of higher pay

<p>The labour supply curve for any industry or occupation will be upward sloping.</p><p>As wages rise, other workers enter this industry attracted by the incentive of higher pay</p>
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Causes of outward shifts in labour supply

-Net inward migration of suitable qualified / experienced workers

-Fall in relative pay/earnings in substitute occupations

-Lower entry barriers to this particular job such as minimum professional qualifications

-Demographic factors causing a rise in the active labour supply

<p>-Net inward migration of suitable qualified / experienced workers</p><p>-Fall in relative pay/earnings in substitute occupations</p><p>-Lower entry barriers to this particular job such as minimum professional qualifications</p><p>-Demographic factors causing a rise in the active labour supply</p>
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Causes of inward shifts in labour supply

-Brain drain effects – an economy loses skilled workers overseas

-Decline in non-monetary rewards associated with the job e.g. job dissatisfaction / stress

-Fall in relative pay in this occupation compared to other jobs / rise in min qualifications

<p>-Brain drain effects – an economy loses skilled workers overseas</p><p>-Decline in non-monetary rewards associated with the job e.g. job dissatisfaction / stress</p><p>-Fall in relative pay in this occupation compared to other jobs / rise in min qualifications</p>
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Non financial factors affecting labour supply

-The convenience and flexibility of hours

-Status/Promotion chances

-Flexibility of location

-Qualifications and skills

-Highly skilled workforce required = less demand

-Job security

-Pleasantness of the job

-Holidays

-The quantity and quality of training

-Location

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Transfer earnings

The minimum income necessary to encourage a worker to take a particular job

<p>The minimum income necessary to encourage a worker to take a particular job</p>
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Economic rent

Income above transfer earnings - the additional income a worker receives

<p>Income above transfer earnings - the additional income a worker receives </p>
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Occupational Immobility of Labour

Occurs when there are barriers to the mobility of factors of production between different industries leading to these factors remaining unemployed, or being used inefficiently

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Causes of geographical immobility of labour

-Family and social ties – older people more reluctant to move

-Financial costs involved in moving home including the costs of selling a house and removal expenses.

-Regional / local variations in house prices leading to a shortage of affordable housing in many areas

-High cost of renting a suitable property

-Differences in the cost of living between regions and countries

-Migration controls e.g. possible caps on inward migration

-Cultural and language barriers to living and working overseas

-A default behavioural instinct which is a dislike of change