Labour Market Demand curve Demand for Labour Firms

Labour Market Demand curve Demand for Labour - Firms The Demand Curve for • Demand for Labour is a Labour is downward sloping derived demand • This means that the demand because: v Employers can hire more for labour depends on the labour at lower wages rates demand for goods and v People can be replaced by services. machines. The higher the • The goods demanded the wage rate, the more firms more staff required to will install machines which produce the product e. g. can replace humans. more demand for kiwifruit v Shifts result from a change the more pickers/ graders in demand for the good and to process the fruit. productivity.

Demand Curve for Labour Real Wages An increase in wages brings about a decrease in quantity demand for labour. DL QL

Supply of labour - People • The vertical shape of the Supply curve of Labour shows the limit imposed by population. This is the quantity where all those who are able to work are working. • Shifts result from: • Population • Age structure • School leaving age • Participation rate • Immigration / Emigration (net migration) • The upward sloping shape of the Supply curve of Labour shows that: - Workers are more willing to supply their labour to the market at higher wage rates - People are more likely to sacrifice their leisure time (the opportunity cost of working) if the financial rewards are attractive enough

Supply of Labour Real Wages SL An increase in wages brings about an increase in the quantity supplied for labour. QL

The Labour Market In a free labour market the wage will move to We – where quantity demand equals quantity supplied. SL Real Wages We DL Quantity of Labour Qe At a wage above or below ‘We’ there will be surpluses or shortages of labour and market forces will push wages back to ‘We’.

• Distance A shows the level of Employment A Minimum Wage SL Wages • Distance B shows the level of Involuntary Unemployment W min We • Distance C shows the level Quantity of Labour of Voluntary Unemployment DL Qe A B C