Supply of Labour - A-Level Economics
Supply of Labour
Supply for labour comes from the general population (i.e. the workforce) of the economy.
Supply of labour is defined as the quantity of labour hours that the workforce is willing to supply at a given wage rate.
Factors which determine supply of labour
Wage Rate
A higher wage rate will increase opportunity cost of leisure time, which will encourage employed workers to work longer hours and also encourage inactive people to go into work.
Benefits and advantages of work
Improvements to working conditions and benefits such as paid holidays and job security will all increase supply of labour.
Net Migration
A large level of immigration increases the size of the workforce, which leads to greater supply of labour.
Income Tax
A reduction in income tax will increase the benefit of working, so more people are willing to work.
Benefits
A reduction in Jobseeker’s Allowance will encourage the unemployed to accept a lower wage rate, increasing the supply of labour. Also, a reduction in benefits for inactive people will encourage them to look for work.
Trade Unions
Trade Unions exist to try and increase wage rates and improve working conditions. Such actions will increase the supply of labour.
Government Regulations
Regulations such as NMW increases the wage rate, and so increases the supply of labour.
Regulations such as the EU Work Time Directive limits the number of hours you can work to 48 per week, which reduces the number of hours of work offered to firms.
Social Trends
In recent times there has been an increase in the number of women working. A trend like this results in a greater supply of labour.
The supply of labour refers to the quantity of labour that workers are willing and able to provide in a given market at a given wage rate.
Changes in technology can affect the demand for different types of labour, leading to a shift in the supply of labour as workers adjust their skills and education to meet the changing demands of the labour market. This can lead to changes in the wage rate and the overall equilibrium in the labour market.
The supply of labour is affected by various factors, including the wage rate, working conditions, availability of other job opportunities, education and skills, demographics, and government policies.
A movement along the supply of labour curve occurs when there is a change in the wage rate, leading to a change in the quantity of labour supplied. A shift in the supply of labour curve occurs when there is a change in any other factor affecting the supply of labour, leading to a change in the entire curve.
The labour market equilibrium occurs when the quantity of labour supplied is equal to the quantity of labour demanded, resulting in a wage rate that clears the market.
The elasticity of labour supply refers to the responsiveness of the quantity of labour supplied to a change in the wage rate. If labour supply is relatively elastic, a small change in the wage rate will result in a large change in the quantity of labour supplied, leading to a lower wage rate. If labour supply is relatively inelastic, a large change in the wage rate will result in only a small change in the quantity of labour supplied, leading to a higher wage rate.
The government can intervene in the labour market by implementing policies such as minimum wage laws, employment protection legislation, and training programs to improve the skills of workers. These policies can affect the supply of labour and the wage rate in the market.
Workers can increase their bargaining power by forming trade unions or other collective bargaining arrangements. These groups can negotiate with employers for better wages and working conditions, leading to a higher wage rate and improved benefits for workers.
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