3.5.2

• factors influencing supply of labour:

  • migration
  • income tax
  • benefits
  • trade unions
  • social trends skills
  • required skills and qualifications
• trade unions protect members as they pay for a membership and negatiate about any concerns members might have
• supply of labour curve is backwards bending because an increase in wages leads to an increase in hours worked at first, but at a certain point it leads to a decrease in hours worked
• substitution effect occurs when workers replace hours with social time because higher wages means they can afford it
• substitution effect causes supply of labour to fall from L2 to L3
• on the supply of labour curve, when hours worked is the highest (L2), more people. want to work at that wage rate so supply of labour increases
• Initially as wages rise, workers will want to work more as the opportunity cost of leisure is higher. At higher wage rates, workers will choose to work fewer hours which reduces the supply of labour. This is because the income effect causes workers to reduce their hours to prioritise leisure (as they can afford it)
• firms can increase the number of hours worked by its workforce by increasing the numeric of hours for its existing labour force or recruit new workers
• an increase in wage rates may not increase the number of hours worked by existing labour but it will increase the number of workers who will join from other industries
• pecunary benefits are fringe benefits that motivate workers such as holiday pay and a company car
• a high population means there is a large supply of labour. but the distribution of age is important as there needs to be many people of working age to ensure there’s a high supply of labour
• migrants of working age come to the UK to work to help distribution of age
• non monetary benefits: supply of labour increases if there is high job satisfaction. some jobs are attractive if they are close by or in an area with a good social life. others can be attractive if they provide free healthcare
• more educated workers means there is a higher supply of workers. this is important in industries which require qualifications
• occupations that require high levels of education may suffer from lower supply of labour compared to low skills jobs that don’t require that much education/qualifications
• trade unions can restrict the supply of labour by introducing barriers to entry - e.g. you need a degree for teaching
• if many local jobs are unpleasant and offer low wages, then supply for alternatives will be higher
• legislation can affect supply of labour - government can change the school leaving age and the retirement age
• market failure can be caused when workers are unable to easily move between jobs
• geographical immobility is when workers are unable to move to different places and find work. could be because of social reasons (not wanting to move away from family). may also be due to high costs of travel and accomodation
• occupational immobility is when workers are unable to move between jobs as they lack the appropriate skills so it is difficult to transfer to jobs in other industries
• immobility can mean there is an excess supply of labour increases one area and excess demand in another.
• even if wages are higher where there is excess demand, people will be unable to leave to go that job because of their immobility
• the UK suffers from a severe skills shortage which could costs £90bn a year following Brexit
• in the UK, industries that require maths teachers, engineers and social workers are suffering from skills shortage