Tuesday, 11 – 10 – 2015
The following factors may cause the demand for labour to change :
Consumer demand for goods and services
If consumer demand rises, firms ma expand output in response. To do so they will tend to increase their demand for labour This may initialy mean asking their existing workers to work overtime, but may also involve hiring more workers if the increase in consumer demand is permanent. Changes in the pattern of consumer demand over time, due to population changes and changing tastes, can therefore mean demand for some types of labour will be rising while demand for others is falling.
If labour becomes more productive and adds more value to output over and above their wage costs, the firms may demand more labour, New Technologies and working methods, and training programs, can help increase the productivity of labour.
Changes in the price and productivity of capital
If machinery and equipment becomes cheaper or more productive relative to labour, then a firm may replace labour with more capital-intensive production methods.
Changes in other employment costs
Wages are not the only cost to an organization of employing people to work. For example, employers in many countries have to pay social security contributions or each worker they employ If these are increased by the government then the demand for labour may fall. Regulations may also change over time, requiring employers to spend more on health and safety equipment in their workplace in order to protect their workers.
Changes in the net advantages of an occupation
A person looking for paid employment is likely to compare the advantages and disadvantages of different jobs before reaching a decision. For example, in addition to wages they may consider the number of hours they are required to work and when, holiday entitlements, promotion prospects and how secure each job is. There may also be fringe benefits such as a company car, free medical insurance, increased pension and a subsidized canteen. Al the factors that affect the attractiveness of a job are called its net advantages
- Dan Moynihan & Brian Titey. (2015). Economics, A Complete Course for IGCSE and O Level: University of Cambridge International Examination.
- Google Pict. Involve (Accsess on October 13,2015)
- Google Pict. Costs (Accsess on October 13,2015)
- Google Pict. Consider (Accsess on October 13,2015)
Dan Moynihan & Brian Titey. (2015). Economics; A Complete Course for IGCSE and O Leel. 2015. hlm 171