1.6.2 Influences upon the Supply of Labour to Different Markets What factors influence your ability and willingness to supply your time and efforts to the labour market i.e. to work? Are these factors the same for your parents or older relatives? AQA 1.6: The Labour Market

1.6.2 What you need to know The supply of labour to a particular occupation is influenced by monetary and non-monetary considerations Non-monetary considerations include job satisfaction and dissatisfaction and working conditions The supply curve for labour shows the relationship between the wage rate and number of workers willing to work in an occupation The causes of shifts in the market supply curve for labour Students will not be required to understand the determinants of an individual’s supply of labour or the backward bending supply curve

Monetary factors influencing supply in labour markets Monetary factors are the financial rewards for a worker supplying their labour to a firm The reward for labour is a wage The higher the wage the more people will offer their services Wage is however related to skills, qualification and experience Workers as economic agents seek to maximise their earnings How are zero-hour contracts likely to affect the demand for and supply of labour? http://www.bbc.co.uk/news/business-23570345 Cable warns of exploitation of zero-hours contracts

Non-monetary factors influencing supply in labour markets Non-monetary factors are the non-financial rewards for a worker supplying their labour to a firm These include Fringe benefits e.g. company car Working conditions e.g. office environment Job satisfaction/dissatisfaction The economic welfare derived from leisure time

Non-monetary factors – job satisfaction/dissatisfaction Job satisfaction/dissatisfaction is the fulfilment achieved from working for a firm This will vary from worker to worker Some workers will seek promotion Others might look for a secure job or social interaction in the workplace

Non-monetary factors – working conditions Working conditions is the environment within which the workforce operate This will include job hours, safety, the physical environment and mental demands put on the workforce Health and safety requirements in countries such as the UK ensure that there is a high level of protection for the workforce However, in some developing countries poor working conditions can lead to severe stress and even death What are the working conditions at Amazon?

Non-monetary factors – the economic welfare derived from leisure time Economic welfare for an individual is the combination of benefits received from work and leisure time. This might include the financial and non-financial rewards associated with work and the satisfaction achieved from the individual’s leisure time e.g. spending time with family and friends. Leisure time has an opportunity cost due to the income lost when not working. There is a positive substitution effect between work and leisure. Higher wages lead to workers substituting more work for leisure There is a negative income effect between work and leisure. Higher wages mean that workers supply less work as they can work fewer hours for the same income Workers derive economic welfare from their leisure time They will take this into account when supplying their labour to a firm Higher wages will act as an incentive for a worker to supply more of their time to a firm but also mean that workers don’t have to work as long for the same rewards

Factors influencing supply in labour markets Factors influencing the supply of labour include: Population migration Increase the supply of labour as more people come into a country seeking employment Often willing to work for the minimum wage EU offers free movement of labour Income tax and benefits High income tax and high benefits act as a deterrent to the supply of labour UK migration figures a best guess, say MPs. http://www.bbc.co.uk/news/uk-23475230 http://www.bbc.co.uk/news/uk-23265391 http://www.bbc.co.uk/news/business-23306092 http://www.bbc.co.uk/news/uk-politics-23325667 Net migration 'could be underestimated'. Should the Government be doing more to force people back to work?

Factors influencing supply in labour markets Factors influencing the supply of labour include: Government regulations National minimum wage An increase in the minimum wage may encourage more people to supply their services However, it may also cause a fall in demand Trade unions Improve pay and working conditions attracting more people to supply labour Take industrial action to withdraw the supply of labour Push wage rates up through negotiations with employers What is the impact of the National Living Wage? Trade unions are organisations that work to protect the economic wellbeing of their members. http://www.bbc.co.uk/news/business-36760387 http://www.bbc.co.uk/news/business-23978247 TUC warns of co-ordinated strike action.

The supply curve for labour The supply curve for labour (SL) is upward sloping. It shows the amount of work that labour is willing and able to supply at any given wage rate. An increase in the wage rate will lead to more workers offering themselves for work. This could be workers from within the industry working more hours or new workers from outside of the industry attracted by the higher wage rates. Wage rate/MRP Quantity of Labour SL

Shifts in the supply curve for labour The supply curve for labour will shift if there is a change in the number of workers in the economy e.g. immigration. Supply of labour to specific industries will change according to whether that industry is seen to be more or less attractive than other industries. Wage rate/MRP Quantity of Labour SL1 SL2

Elasticity of supply of labour Elasticity of supply of labour measures the responsiveness of the quantity supplied of labour to a change in the wage rate. It can be calculated as: % Δ QSL % Δ WR A figure below 1 means that the elasticity of supply of labour is inelastic, above 1 elastic. Wage rate/MRP Quantity of Labour SL is inelastic SL is elastic

Determinants of the elasticity of supply of labour You will not be required to understand the determinants of an individual’s supply of labour. However, it can provide insight into the availability of workers in different markets. Elasticity of supply of the product higher supply of the product will increase the elasticity of supply for labour Time the longer the time period the more elastic the supply curve as it is easier to substitute between factors of production and to change the contracts of workers Availability of substitutes low skilled labour will be more price elastic Barriers to entry many professions restrict workers from entering the labour force e.g. dentistry and accountancy by requiring experience and qualifications

10 quick questions in 10 minutes – are you ready? What is the monetary reward for the supply of labour? State 2 non-monetary factors that influence the supply of labour. Is the substitution effect positive or negative? Is the income effect positive or negative? Draw and label a supply curve. What does MRP stand for? How is the elasticity of supply calculated? State one factor that determines the elasticity of supply. What is the opportunity cost of leisure time? End

Task Identify a profession of your choice, maybe one you are interested in pursuing in the future Carry out some research into the factors affecting the supply and demand for labour within this profession Prepare a short presentation on your research findings, use economic theory to underpin your explanation of the factors affecting the supply and demand of labour within your chosen profession