A population with many people of working age ensure there is a high labour supply this can be increased through migration
Legislation
Increasing the school leaving age and retirement age means an increase in human capital and the labour supply and a reduction in the skills gap so productivity grows
Cause of Labour Market Failure
Geographical immobility
Occupational immobility
Excess demand in one market and excess supply in another
Income Effect
As a worker gains higher wages they supply fewer hours as it requires less time for them to maintain their standard of living, but this depends on the type of worker i.e. investment bankers are wage motivated so will supply more hours compared to teachers
Substitution Effect
As wages increase workers will forgo leisure to work more as the reward for labour is higher
Backwards Bending Supply Curve
Depending on each effect's strength, the labour supply will differ i.e investment bankers are wage-motivated so the substitution effect is stronger thus they supply a lot more hours before the income effect takes place causing the curve to go back as wages are still rising with inflation and promotions even though they are working less.
