Shifts in Labour Supply

What events shift the supply curve for labour?

The supply curve for labour will shift in response to changes in the same set of factors that shift demand curves for goods and services.

Changes in Preferences

A change in attitudes toward work and leisure can shift the supply curve for labour. If people decide they value leisure more highly, they will work fewer hours at each wage, and the supply curve for labour will shift to the left. If they decide they want more goods and services, the supply curve is likely to shift to the right.

Changes in Income

An increase in income will increase the demand for leisure, reducing the supply of labour. We must be careful here to distinguish movements along the supply curve from shifts of the supply curve itself. An income change resulting from a change in wages is shown by a movement along the curve; it produces the income and substitution effects we already discussed.

Changes in the Prices of Related Goods and Services

Several goods and services are complements of labour. If the cost of child care (a complement to work effort) falls, for example, it becomes cheaper for workers to go to work, and the supply of labour tends to increase. If recreational activities (which are a substitute for work effort) become much cheaper, individuals might choose to consume more leisure time and supply less labour.

Changes in Population

An increase in population increases the supply of labour; a reduction lowers it. Labour organizations have generally opposed increases in immigration because their leaders fear that the increased number of workers will shift the supply curve for labour to the right and put downward pressure on wages.

Changes in Expectations

One change in expectations that could have an effect on labour supply is life expectancy. Another is confidence in the availability of Social Security. Suppose, for example, that people expect to live longer yet become less optimistic about their likely benefits from Social Security. That could induce an increase in labour supply.

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