Factors Affecting Demand and Supply of Labor
Demand and supply are substantial elements of economics. In fact, they are the backbone of the regional, national or global market. Without labor, it is not that easy to develop the economy has there will be no income or revenue that aids boost any nation’s economy. There is a great relationship between demand and supply of labor. Companies should always determine how much of each input even before making output or any pricing decision. To enjoy the labor market, it is great to also consider factors affecting demand and supply of labor.
The relation between demand and supply brings about the forces behind the allocation of resources. The demand and supply of labor is generally determined by the labor market and the mainstay participants are workers and companies. Workers are significant to any firm as they offer labor whereas firms guarantee wages. To make good profits, companies should invariably optimize the factors of production and labor.
Every company demands labor and hiring more workers guarantees productivity. Most of the markets in the world are competitive and also demands workers with the highest degree of mobility. All in all, there are a number of factors that are known to affect demand and supply of labor and they include;
- Economy- Loss of jobs during hard economic times mean less disposable income to much labor for involved companies. Majority of the firms experience less production and there is reduced supply of labor. Supply of labor will easily increase with an increase in wages. Hence, there will be more workers willing to work in a company of the pay is exceptionally good. Demand for labor will increase with a rapidly growing economy. On top of this, an increase in population will lead to an increase in supply of labor.
- Globalization- Many multinational companies have established new companies or branches in not only developing nations, but also in developed countries. This move has impacted the demand and supply for labor greatly. Many companies have invested in developing countries due to the high availability of labor in the nations. In addition, the demand and supply for labor has been high as majority of the citizens in these countries are in search for jobs and good pays.
- Better compensation- Compensation in any marketplace includes benefits and wages. In many countries, there has been an upward pressure on wages and descending pressure on benefits. Lowering working age has many times increased the supply of labor. Many governments have increased the retirement age and this has ascended the increase in the supply of labor hence increased productivity.
- Factors such as educational requirement, social factors, new technologies and unforeseen events have all impacted demand and supply for labor in one way or another.
Many times, individual’s supply of labor depends on his or her partialities. By working extra hard, an individual supplies more labor, but reduces his or her consumption of leisure time and increase productivity. With different markets that exist in the world, it is wise to be well-versed with all factors that affect demand and supply of labor.
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