Supply of Labour

• Individual labour supply = the number of working hours labour are willing to work at a particular wage rate for a job.
  • If wages rise, individual workers are incentivised to work more hours.

• Occupation labour supply = the number of employees who will work at their wage rate.
  • If wages rise, more people (employees) are attracted to an occupation.
• The supply curve for occupational labour is upward sloping.

• The welfare that workers get from working is determined by both monetary and non-monetary factors.
• We call this the net advantage.

• Wages provide money which employees can use to buy goods and services. Purchasing these goods and services gives utility or welfare. Monetary factors therefore contribute to net advantage.

• Non-monetary factors that can give workers utility or welfare include:
  • Free food (e.g the free breakfast & lunch offered for employees at Google).
  • Dental care.
  • Gym facilities.
  • Training.
  • Job satisfaction.

• One of the non-monetary considerations is the level of job satisfaction.
• If someone is satisfied in their work, they may gain more welfare from their job.
• The non-monetary benefits contribute to the level of satisfaction. If an employee has high levels of satisfaction, they may settle for a lower wage because the non-monetary considerations make up for this.

The backward bending supply curve is a theory in which after a certain point, rising wages lead to a reduction in labour supplied.

• Initially as wages rise it becomes more valuable to work rather than to take leisure, due to the substitution effect of work becoming more beneficial.
• After wage W, the benefit of the extra money earned diminishes and instead labour chooses to take more leisure rather than work as long. This is due to the income effect.

• An increase in the number of workers will shift the supply curve right. This could be due to several factors:
  • E.g increased immigration because of joining organisations like the European Union.
• If there's a shortage of skilled workers in a country, net migration of workers to that country can help to boost labour supply.
• Many countries need workers seasonally, especially for industries like the agricultural industry. So net migration can help boost labour supply during these periods too.

• The higher the level of required education, the lower the supply of workers for that particular job. This is because not as many people in society (or the world) will have the necessary skills.

• Workers will probably be drawn to higher paying jobs over others. The higher the wages, the greater the supply to that job.

• If a job is poorly advertised then less people will know that a job exists. If a job is well advertised, perhaps on recruitment platforms like talent.io or Linkedin, then the supply of labour for that job is likely to rise.
• In this case there is better information in the market.

• Government policy can increase or decrease the supply of labour.
  • E.g a government may support rules that set high qualifications for particular modes of work, which will decrease the number of qualified workers and the supply of labour at a given wage.
  • Or the government may offer subsidies for nurses to gain their qualifications. A policy like this will increase the supply of labour.