1. 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

2. 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

3. 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?
Cable warns of exploitation of zero-hours contracts

4. 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

5. 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

6. 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?

7. 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

8. 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.
Net migration 'could be underestimated'.
Should the Government be doing more to force people back to work?

9. 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.
TUC warns of
co-ordinated strike action.

10. 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

11. 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

12. 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

13. 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

14. 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

15. 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