May 14, 2022
The Economics Of Labour Supply Explained
In all competitive markets, the supply of and the demand for workers are among those that determine the equilibrium wage and the equilibrium quantity of labor. Amidst these two factors, there is a typically overlooked aspect: what each person decides to do with their time and opportunity as it is entirely up to them to decide whether or not to work. To illustrate, there are some people who prefer to spend their time for leisure, while others prefer to spend it working. These two both influence the economic cycle — leisure increases the time for the consumption of goods, while work provides the income to purchase them. Consequently, when people engage more in the former, the lesser his or her income would be. On the other hand, when they engage more in the latter, the less their time for leisure is. In turn, they face a trade off between time and income, which then defines the supply of labor.
Think of labor supply as the flip side of the coin for leisure: the more leisure people demand, the less labor they supply. Although leisure is a normal undertaking, engaging more on it will cause a disparity between the availability of income, the demand for goods, and eventually, the labor supply in the market. To understand it further, let us take a look at the economics of labor supply.
What is Labor Supply?
Labor supply is the amount of work measured in hours that workers are willing to render during a given time period. Taking the number of population as given, its quantity depends on two main points according to research: First, the number of people engaged in or seeking paid employment; and second, the number of hours that each of them is willing to supply once they are in the labor force. These two ultimately define the availability of manpower supply at a given economy, which affects the number of employees rendering their services to businesses.
Key Factors Affecting Labor Supply
- Changes in Preferences
A change in the outlook of people as to how they want to spend their time, whether for leisure or work, can shift the supply curve of labor. Should they give more value to their time, fewer of the population would work. On the other hand, should they decide to consume more goods and services, there is a greater possibility of an increase in the number of workers as they have to earn income in order to cater their needs.
- Changes in Population
An increase in the population increases the supply of labor. Consequently, a decrease in the population also decreases the availability of manpower supply. This is grounded on the fact that when there are more people, the likely it is for more to engage in the labor force.
- Changes in Income
Changes in income affects the demand of people for leisure and work. To illustrate, an increase in income will likely expand their demand for leisure as they can now afford to face the trade off between time and money as they earn more, reducing the supply of labor as a result. On the other hand, a decrease in income would likely increase the demand for work since people would have to earn more in order to consume more goods and services.
- Conquering Changes in the Labor Supply
To conquer the changes and fluctuations in the availability of labor supply, among the methods that organizations can apply is engagement in manpower solutions. Manpower suppliers provide for a wide network of laborers that allow employers to fill-in their vacancies and have the required number of laborers working in no time. For a fast and flexible transaction, they can reach out to World Star Manpower, an authorized manpower supply company in the UAE, for their labor supply needs.