Studies of Economic Change

Labour supply

Labour demand and labour supply belong to each other and are part of the labour market:

Low wages lead to a low labour supply. High wages lead to a high labour supply.

The bottom end as well as the top end of the line of the labour supply are characterised by two specialities: To ensure the poverty line at the bottom end the hours worked have to be prolonged. At the top end where the social status cannot be increased any further laziness and convenience are becoming an overwhelming desire. Incentives to work can only be ensured by disproportional high wage increases and unreasonable high boni. This is confirmed by the actual wage increases for top management positions and financial experts in a demonstrative way.

The starting point characterises the labour market according to the accepted doctrines as is shown by line A (1).

The scientific and technological development causes the rationalisation of production processes and to job redundancies resp. unemployment over the time. Because of the fear of being fired the employees can be played off against each other and the unemployed. Consequently the employees increase their labour supply.

The demands on the average earning middle man increases, a process of selection occurs. As a result the labour supply decreases. The line of the labour demand rotates and shifts to the bottom.
[Note: The shift to the bottom is not shown in the graphic.]

This process is symbolised by line A (2) and A (3).

Looking at the limits at the bottom and the top end of the labour supply you can imagine that both specific areas increase its size. The area in the middle gets steeper until the line turns over which means that the labour demand and the labour supply have a similar shape at the end of this described development.

The impact of the development of demand and supply on the labour market resp. the intersection between both lines is shown on the next site.