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Miss Cummins

on 13 November 2017

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Transcript of Labour

Ms. Cummins
Supply of Labour
The supply of labour in the economy is the total number of hours worked in the economy during a specific period
This is determined by a number of factors:
Labour Supply Curve
Upwards sloping
Left to right
Mobility of Labour
Factors that Influence the Elasticity of Demand for Labour
Factors Affecting the Efficiency of Labour
1.Amount of Training
How Appropriate is MRP for Setting Wages in the Public Sector?
Physical output is not always produced
is the human acitivity directed towards the production of wealth

Factors Affecting and Individual Firm's Demand for Labour

Its payment is the wage rate
It is a derived demand - it is demanded for its contribution to the production process
Demand for Labour
Price of labour is determined by demand and supply
Demand curve = MRP curve
Wage rate is €400, 50 workers employed as every worker is demanded up to and including the worker whose MRP and wage rate are equal
So the demand curve for labour is its MRP curve which is downwards sloping from left to right
Wage rate (€)
Remember a worker is employed as long as their MRP = wage rate
MRP of the Worker
Entrepreneurs Expectations
- future expectation postive > increase in investment and labour
Corporation Tax
- encourages foreign investement > increases demand. And vice versa
Availability of New Technology
- fall in demand for labour
Government Incentives
- encourage employment, reducing PRSI or travel tax
Price of Other Factors of Production
- comparing cost of extra labour
The Demand for a firm's output
- buoyant demand > hire extra staff and vice versa
Wage Rate
- lower the rate, higher the demand for labour
7.Government Policies -
ease of restrictions, immigrants, entry requirements
6.Labour Mobility -
movement of workers, movement through the EU. Brexit?
5.Numbers of Hours Worked
4.Levels of Income Tax -
tax rates fall, encourages people to work, high rates discourages work
3.Participation Rate -
number of people willing to work, > social attitude, attitudes of homemakers, state of economy, welfare benefits
2.Wage Levels in the Economy -
high wage = high supply, BUT can also lead to more leisure time which may decrease supply
1.Size of population
When wages increase, more labour is supplied
When wages fall, less labour is supplied
*Normal supply curve
May be a slight decline in supply of labour at higher wage rates as workers substitute leisure for labour
This produces a backwards bending supply curve of labour
This can be seen where there are high marginal rates of tax, workers feel that the after-tax pay is not worth the increase in effort, so leisure time is preferred
Q1 Q2 Q3
Wage rate at W1 - quantity supplied is Q1
Wage rates above W2 (ex. W3), the amount of labour falls back from previous level
Similiarly wage rate W2 supplies Q2 in terms of labour
The Equilibrium Wage Rate
Horizontal Supply Curve of Labour
Restricting Entry to Profession
Trade Unions and Wage Rates
Wage Drift
Ratchet Economy
Labour Supply Curves
See sheet !
Number of factors
Social connections
Selling/buying a house
Fear of change

Number of factors can
High degree of skill/specific skill
High cost of retraining
Barriers - high standard exams

Economic policies
that could increase geographical mobility:
Increase housing
Educational facilities
Social infrastructure (parks, shops)
Government supports (grants)
Updated information
Economic policies
that could increase occupational mobility:
Educational courses (opportunities)
Training (suitable times/costs)
Government policies (work permits/schemes)
Trade union barriers (reduce)

Percentage of Labour Costs to Total Costs
Labour costs low = increase in wages won't influence demand for labour
Substitutability of Labour
Productivity of Labour
Elasticity of Demand for the Finished Goods
If labour can be replaced by machines and wage rate increases then demand for labour will fall - elastic
On the otherhand, if machienes can't do the work and wages increase, labour won't be replaced - inelastic
If the product is inelastic and wages increase - higher costs passed down to consumer, demand or labour is unaffected
Productivity of labour is high - unlikely that it will be replaced by technology
9.Dedication of the Worker
8.Climatic Conditions
7.Degree of Specialisation
6.Living Conditions of the Workforce
5.Quantity/Quality of Other Factors Available
4.Innate Talent
3.Level of Education
2.Management Expertise
Good management - standards, deadlines, efficiency, rewards
Leaving cert, degrees, masters
Golf, tennis players
Healthy, well nourished, good accomodation
Capital and Labour used togther
Non-market output
Many of these jobs are services, difficult to measure MPP
Produce may not be sold in marketplace - no MR
Combination of both - civil servant and computer
You cannot calculate MRP
Wages determined by comparison
Benchmarking Review Body - government
Why do different categories of workers receive different wages?
Different Skills
Negotiating Strength of the Workers' Trade Union
Non-monetary Benefits
Tradition Attached to Certain Jobs
Possession of Innate Talent
Nature and Conditions of the Job
Educational Qualifications
Length of Training
Doctor and nurse
Specialised nurses
Post-grad > higher salary
Dangerous, unsocialable hours
Legal jobs/accountancy
Long holidays, low-interest loans, subsidised health care
Full transcript