Studies of Economic Change

Labour demand

The demand for labour can be described in a diagram of two axes:

The horizontal axis symbolises the employment, the vertical axis symbolises the wages. Line N (1) as starting point means that low wages leads to a high demand and high wages leads to a low demand of labour.

The starting point characterises the labour demand according to the accepted doctrines and is shown by line N (1).

We have seen before that the idea of the evolution theory has an impact on the innovation rate. An increasing innovation rate leads to an increase of the demand for goods and services as well. Consequently the starting point shifts to the right because the labour demand takes place on a higher level as there is an increasing demand of labour due to the increasing demand for goods - and not due lower wages.

The development of the labour demand due to increasing innovation rates is shown by line N (2).

But a higher innovation rate enables to rationalise the production processes as well. This leads to more efficiency and to cost reduction resp. savings especially for repetitive work. Consequently the demand for low-paid jobs decreases. On the other hand innovations require providing problem solving capacities. Therefore the labour demand for high-paid jobs remains on the level of line N (2) while the demand for low-paid jobs disappears at the same time. Because of the possibility to export jobs to low-wage countries the demand for low wages decreases disproportionate which is supported by irrational alarmists about Germany as a location for business.

The result of more efficiency and saving effects is shown by line N (3).

This development corresponds with the analysis of the labour demand according to chapter 7: The labour demand 1 is shown by line N (1), the labour demand 2 is shown by line N (2), and the labour demand 3 is shown by line N (3). Finally line N (3) is created by adding line N (1) and line N (2).

Chapter 9 deduces a similar development of the labour demand by arguing with the increase of the demand for high wages and the decrease of the demand for low wages.