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Microeconomics of Labour Supply - Essay Example

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Microeconomics of Labour Supply

From a microeconomic perspective the labour market differs from other markets in terms of the factors of demand and supply mainly because there will be a limited supply of the resource i.e. "working hours",involved which may be further varied by many situations like epidemics,migration and increased vacations or even the wage rates currently being offered.The article discusses the correlation between employment and Labour demand and supply in the United Kingdom with the latest statistics and compares them to the employment rate in the 1970's.This has been attributed to the labour market performance which has increased since 1997
The national statistics ( have some good news for the British economy as they show that not only has employment increased but people are increasingly not claiming unemployment.This is because more jobs have been created and average earnings, excluding bonuses have increased (
Now coming to the basic model of Microeconomic supply of labour,the labour supply curve in the microeconomic model is upward sloping because higher wages will attract more and more workers .This includes the labour supply emanating from the pool of labour supply which is working for other industries or the untapped sources of labour like housewives and the younger pool of labour force who were previously lacked the incentive to work.This also has been influenced by the elasticity of labour supply.
So what are these factors affecting labour supply Current wage rate prevalent in the industry is definitely an issue here as it will bring out the untapped reserves of labour.This will also be affected strongly by work opportunities,pension schemes,share option offers as well as a sanitary and safe work place free of stress and harassment.Labour supply responds to wage differentials within competing jobs so if a similar or substitute vocation will be offering better pay and benefits the labour will tend to shift to that sector.In the recent years there has been an increase in the exodus of the British labour supply to management oriented Jobs because they offer better work packages and perks like company cars and flats.However it should be noted that there can certain barriers to an industry labour supply especially if it is qualification or license based.For example one reason the wages/remuneration of lawyers and chartered accountants is so high is because they have to spend a long time training for their degrees and spend a lot of money of achieving their technical licenses.The supply of labour will increase due to occupational and geographical mobility as well mainly because then the labour will not only be able to switch jobs easily from one industry to another but they will also be better equipped to travel to far off areas to work for their jobs.Other factors include the fact whether the industrial conditions are conducive to women with families or young people struggling to get an education while earning a living.Lack of job security and future career development can play an immense role in increasing/boosting the supply of labour.Things regarding geographical mobility have changed a lot eversince UK's accession to the European Union as people from disadvantaged EU member states have a large influx into Britain and they are competing for Jobs with them.It should ...Show more


In the study of labour economics the use of microeconomic principles for the analysis of macro-economic principles will allow a closer study of the role of individuals and individual firms in the labour market. Labour supply can be perceived in a way similar to other microeconomic problems in terms of their working hours, opportunity costs and their ability to trade their skills for work…
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Microeconomics of Labour Supply essay example
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