3.5.2 Supply of labour

SUPPLY OF LABOUR

• ability and willingness of people to make themselves available to work at different wage rates

FACTORS INFLUENCING SUPPLY OF LABOUR

• wage rate

• population/distribution of ages

• non-monetary benefits

• education/training

• trade unions and barriers to entry

• wages and conditions in other industries

• legislation

• taxes and benefits

FACTORS INFLUENCING SUPPLY OF LABOUR- WAGE RATE

• proportional relationship between wage rate and number of workers willing and able to work

• increase in wage rates will increase number of workers (supply expands)

• new workers may join from other industries or from being unemployed

FACTORS INFLUENCING SUPPLY OF LABOUR- POPULATION/DISTRIBUTION OF AGES

• high population and many people of working age means theres a high supply of labour

• migration into country can increase supply of labour (shifts supply right)

FACTORS INFLUENCING SUPPLY OF LABOUR- NON-MONETARY BENEFITS

• Supply of labour will increase if there is high job satisfaction (shift supply right)

• some jobs offer perks such as free private healthcare etc. which will increase supply

• factors such as holiday, hours of work, flexibility and opportunities for promotion also play a significant part

FACTORS INFLUENCING SUPPLY OF LABOUR-EDUCATION/TRAINING

• more educated workers means there is a higher supply of labour (shift supply right)

• occupations which require high levels of education may suffer from lower supply of labour compared to low skilled jobs

FACTORS INFLUENCING SUPPLY OF LABOUR- TRADE UNIONS

• could attract workers to labour market, because they know their employment rights will be defended

• but limits on workers, such as limiting their ability to strike, might cause some people to withdraw from labour market

FACTORS INFLUENCING SUPPLY OF LABOUR- WAGES AND CONDITIONS IN OTHER INDUSTRIES

• if wages and conditions of jobs in other industries better, supply of this industry decreases

FACTORS INFLUENCING SUPPLY OF LABOUR- LEGISLATION

• can affect supply of labour (e.g. retirement age and school leaving age)

FACTORS INFLUENCING SUPPLY OF LABOUR- TAXES AND BENEFITS

• if taxes too high and benefits are too generous, people might be more inclined to withdraw from labour market

LABOUR MARKET FAILURE- CAUSES

• geographical immobility

• occupational immobility

GEOGRAPHICAL IMMOBILITY

• difficult to move from one place to another for a job due to obstacles

• may not know ab vacancies in other area, high housing costs in other area, leave family

OCCUPATIONAL IMMOBILITY

• workers find it difficult to move from one job to another because of a lack of transferable skills

• particularly difficult in short term when workers need to get new training but in long run it may only be possible at a high cost