SECTION 2WORK

Starter…

• What percentage of gross pay has been deducted from W. A. McGonagle’s wages?

SECTION 2WORK

How labour markets determine pay

GCSE ECONOMICS: UNIT 11

SECTION 2WORK

Aims of today’s lesson …

• Identify factors which affect the supply and demand for labour

• Understand how the demand for labour is derived demand

SECTION 2WORK The Supply of labour

• The supply of labour refers to the amount of work each employee is willing to perform

• Each employee has a decision about whether or not to work

• In effect, each employee can decide how to split their time between work and leisure

SECTION 2WORK

Factors which affect the Supply of labour

• The supply of labour is affected by both monetary (money) and non-monetary factors

• The main factor which determines the supply of labour is the level of wages offered

• The higher the wage or salary, the more willing an employee will be to supply their labour

• This is because each hour worked becomes more valuable to the employee and as a result it becomes more tempting to work

SECTION 2WORK

Factors which affect the Supply of labour

• In addition to the wage rate, there are various non-monetary factors that influence how much an employee wants to work

• Gender: traditionally women were less willing to enter the labour force than men, but this trend has changed

• Why have increasingly more women entered the labour force?

SECTION 2WORK

Factors which affect the Supply of labour

• Ethnic origin: traditionally workers of non-white origin were less likely to be employed; but this trend has changed over the last two decades

• Taxation: Income tax reduced the amount of a wage or salary an employee is allowed to keep; if reduced people with have a greater incentive to work and therefore the supply of labour will increase

• State benefits: benefits are provided in the UK for those looking for work but currently unemployed; if they are sufficiently low people will be more willing to supply their labour, than if they were higher

SECTION 2WORK The Demand for labour

• The demand for labour comes from businesses that need employees to produce their goods and services

• However, the demand for labour is unlike the demand for most goods and services

SECTION 2WORK The Demand for labour

• Derived demand– Businesses don’t demand workers

for their own sake but because they need them to produce goods and services for the firm to sell

– This is known as derived demand; where the demand for labour (i.e. workers) is a derived demand!

SECTION 2WORK

Government influence and the Demand for labour

• The UK government will indirectly affect the demand for labour

• This is because it will influence through legislation how much a business must spend on an employee in addition to paying their wages

• These influences include;– Right to paid holiday – Maternity/paternity pay

SECTION 2WORK Over to you….

• Open and complete the activities on the following document

“Factors which affect pay”

SECTION 2WORK

Reasons for differences in pay….

• Open and make notes on the following information…

“Pages”