However, net migration would also lead to increase in demand for labour because the new workers create additional demand in the economy. If immigration led to an increase in the supply of labour (more workers) then wages would initially fall. Effect of increase in supply and demand for labour Impact of increase in the supply of labourĪn increase in the supply of labour leads to a fall in the wage rate from W1 to W1. Post-Brexit vote, farmers reported difficulty in filling labour vacancies due to a slowdown in immigration.
If immigration slows down, there can be vacancies in these particular jobs. Some jobs, such as fruit picking are unpopular with native-born workers and rely on immigrant labour. fruit pickers, then the supply of alternatives will be relatively higher. If many jobs in a local area are considered unpleasant – e.g. Although many unpleasant jobs, such as cleaning are relatively low-skilled so may still be low paid.Ĥ. Unpleasant jobs will have fewer people willing to do them therefore supply will be relatively lower. For example, even if wages of economics teachers rose, the supply would be quite inelastic – to become qualified would take several years. If it is difficult to get particular qualifications, supply will be inelastic. For a job such as fast-food operator, the number of potentially qualified people is a high percentage of the labour force, therefore supply is much more elastic Market supply of labour for a particular vocation depends upon:įor example, the number of qualified accountants is low, therefore supply is quite inelastic. Now people work fewer hours because they can get their target income from a lower number of hours. After W2, the income effect outweighs the substitution effect.Up to W1, the substitution effect is greater than the income effect, and higher wages causes more hours worked. Therefore, after wage rise, workers may work less because they can get their target income with fewer hours spent working. This is because workers can get a higher income by working fewer hours. This occurs when an increase in wages causes workers to work fewer hours. The substitution effect causes more hours to be worked as wages rise. With work more profitable, there is a higher opportunity cost of not working. With higher wages, workers will give greater value to working than leisure. Two factors that influence a workers supply of labourġ.
Therefore, there is a choice between working more (higher wage) and working less (more leisure). However, a worker isn’t just interested in earning money they are also interested in leisure.Therefore the supply curve for labour tends to be upwardly sloping.Higher wages usually will encourage a worker to supply more labour because work is more attractive compared to leisure.
A look at factors that determine an individuals supply of labour and the market supply of labour.
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