Factors Influencing the Supply of Labour (AQA A Level Economics)

• An agreed amount of money/hour and is calculated directly from the number of hours worked

• E.g. If a student works in a restaurant for 6 hours, 5 days a week and he/she gets paid $10/hour, the weekly wage is $300 (6x5x$10)

• Employment contracts often state the agreed-upon annual salary the employee will receive

• This is then divided by 12 and paid monthly (in the USA it is divided by 24 and paid every 2 weeks)

• The hours worked monthly may vary but the pay received is always the same

• Often used as payment to sales people

• It is typically a percentage of the value of the transaction involved e.g. estate agents receive 3-7% of the selling price of any property they sell

• This can motivate employees to maximise sales

• Money paid in addition to a salary and is usually single annual payment

• Often paid when the company earns high levels of profits, or as a reward for exceptional worker performance

• A fixed amount paid to the employee for each completed item produced e.g. 25 Rupees paid to workers in India for each pair of socks they produce

• Payment based on how well the worker performs

• Workers doing exactly the same job may receive different compensation based on different outcomes they achieve

• Payment through the issuing of shares in the company the employee works for

• This is usually in addition to a monthly salary

• The monetary value of the shares provided to the employee can be calculated on any given day as: number of shares x share price

• Benefits provided in addition to the normal salary

• They can be significant in influencing occupational choices

• Includes benefits such as such as childcare, free lunches, gym membership, company car

• Long training periods (and their costs) act as a barrier to entry and exclude many households from offering labour in certain markets

• Comparative wage rates in substitute labour markets strongly influence the supply of labour; e.g. it is getting harder to recruit economics teachers as the private sector offers higher wages for their skills

• Policies that increase the [popover id="qJhTWXok-ejO4dOy" label="net migration rate "] increase the supply of labour to certain industries, e.g. in 2022, 36% of Singapore's labour force were migrants

Income tax levels

Working conditions

Trade union power

At a certain level, income taxes become a disincentive to households offering their labour. The assumption is that as income tax increases, labour supply decreases - and vice versa

The working conditions & non-wage benefits can act as strong incentive in certain industries e.g. tech companies are well known for their laid-back work environment & wide range of benefits e.g. on-site childcare & restaurants

Trade unions can increase the supply of labour to certain industries as workers consider the benefits of belonging to the union e.g higher wages & a safer working environment

Level of welfare benefits

Social trends

• The higher the level of welfare benefits, the lower the incentive for low-skilled labour to offer their labour, and vice versa

• Social trends include any major changes within society and can influence the supply of labour to certain industries e.g. work from home during Covid resulted in significant changes to the labour market and not all workers returned to work when economies opened up again