Change in supply of labour

After you have worked through this section of the learning unit, you should be able to:

  • explain what the factors are that might influence the supply of labour

A change in any factor other than the wage will cause a shift of the supply curve for labour. These are things such as changes in preferences and social norms, changes in population, changes in wealth and changes in working conditions.

If, for instance, there is an increase in the number of workers for an occupation due to an increase of new entrants into the labour market, the supply of labour for this occupation will increase. In terms of the market supply curve of labour, this is indicated by a rightward shift of the market supply curve from S1 to S2 as indicated in the following diagram:

A change in social norms and preferences can also have a major impact on the supply of labour, such as a change in the role women play in the economy since the 1960s.

Activity

Which one of the following factors will cause an increase in the supply of labour?

Incorrect. Remember that a change in the wage rate causes a movement along the supply curve, which indicates a change in the quantity supplied and not a change in supply.

Incorrect. Remember that a change in the wage rate causes a movement along the supply curve, which indicates a change in the quantity supplied and not a change in supply.

Incorrect. This will cause a decrease in the labour supply.

Correct. A higher participation in the labour market by women causes an increase in the labour supply.