Factors Influencing the Supply of Labour (Edexcel IGCSE Economics)

The Supply Curve for Labour

• The supply curve for labour  (S_L) shows the relationship between the wage rate and number of workers willing to work in an occupation

  • The S_L shows that more labour is supplied as the wage rate increases, which results in an upward sloping supply curve

Diagram analysis 

• The hourly wage rate increases from W₁ to W₂

  • There is an incentive for workers to supply more labour from Q₁ to Q₂

• There is a positive relationship between market supply of labour and wage rate

  • The higher the wage rate, the higher the supply of labour in that occupation (and vice versa)

Factors that Influence the Supply of Labour

• There are numerous factors that influence the amount of labour supplied to a particular industry

  • The supply curve shows the market supply of labour, not the individual supply of labour

Factors Influencing the Supply Of Labour

Example: An increase in the Supply of Labour

• Changes to any of the factors affecting the supply of labour shifts the entire supply curve (as opposed to a movement along the supply curve)

Diagram analysis

• India's growing population has led to an increase in the supply of labour

  • More people are now available to work

• This caused a shift in supply from S to S₁

  • The wage rate remains unchanged at W₁ but the supply has increased from Q to Q₁

Example: A Decrease in the Supply of Labour

• Changes to any of the factors of supply of labour shifts the entire supply curve (as opposed to a movement along the supply curve)

Diagram analysis

• The UK raised the school leaving age from 16 to 18, which has led to a decrease in the supply of labour

  • This caused a shift in supply from S to S₂

• The wage rate remains unchanged at W₁ but the supply has decreased from Q to Q₂