Studies of Economic Change

Phase 1

The demand for labour decreases the higher the wages are. Vice versa: The demand for labour increases the lower the wages. Looking at the graphic you will find the number or share of the employed on the horizontal axis and the level of income on the vertical axis. Therefore the shape of the curve of the labour demands reaches from the top left to the bottom right. The shape of the labour demand is equal to the productivity development and the income distribution even if the scale of the vertical axis is different.

[In the graphic the labour demand is shown by the blue line.]

In opposite to the supply of goods and services the people are restricted concerning their supply of labour. As humans exist they have to offer their work regardless the extension of the labour demand because they have to ensure their pure existence. Wages which are below the poverty level leads to unacceptable long working hours, the negligence of the people or the necessity of additional social welfare or other transfer payments. Collective labour agreements or minimum wages could stop the self-exploitation of the work force at the best.

[In the graphic the poverty level is shown by the red line.]

At the beginning of the industrialisation the productivity is low because the scientific and technological level is low as well. Because of the new and innovative possibilities to accumulate substantial amounts of capital the demand for labour high. On the other hand the wages do not suffice to survive. The consequences are working and living conditions which are disastrous. The hours are 12, 14, or more hours a day even at weekends. This means that the curve of the labour demand is relatively flat. Furthermore is can be assumed that for each person a labour demand exists by principle.

But finally the disastrous working conditions during the industrialisation leads to the insight in the necessity to conclude collective labour agreements between the labour unions and the employer's associations. With the support of the introduction of a national insurance the people can be freed from their existential needs.

Wages below the poverty line can be compensated by collective labour agreements.

The demand for labour is still quite high.