Causes of shifts in labor demand curve
Causes of shifts in labor demand curve
The labor demand curve shows the value of the marginal product of labor as a function of quantity of labor hired. Using this fact, it can be seen that the following changes shift the labor demand curve:
The output price. When output price rises, the labor demand curve shifts to the right { more labor is demanded at each wage. When output price falls, less labor is demanded at each wage.
Technological change causes the MPL function to change, generally to in- crease at each level of L. This shifts the labor demand curve to the right.
For instance between 1960 and 2000 the average hourly output produced by
US workers rose by 140 percent.
However, it is also possible for technological change to shift labor demand to the left. If for instance a cheap industrial robot is installed in the production process for some industrial good, the marginal product of labor could decrease because the robot can replace labor. Such a technological change is called labor- saving. Most technological change seems to be labor-augmenting { it raises the marginal product of labor. This can explain the fact that employment has risen historically along with wages. In ation-adjusted wage increased by 131 percent from 1960-2000, and rms also increased amount of labor employed by
80 percent.
Supply of other factors
The quantity available of other factors of production can a ect the marginal product of labor. For example, if the supply of ladders falls, the marginal product of apple pickers will decrease.
Labor Supply
People face a tradeo between work and leisure. Assume that leisure is en- joyable but work is not.
Leisure has a cost. This is the cost of the work given up to enjoy the leisure.
So the cost of 1 hour of leisure is the person 's hourly wage.
The labor supply curve shows how amount of labor supplied responds to
1
wage. That is, it shows how people 's decisions over leisure and labor change as the opportunity
The labor demand curve shows the value of the marginal product of labor as a function of quantity of labor hired. Using this fact, it can be seen that the following changes shift the labor demand curve:
The output price. When output price rises, the labor demand curve shifts to the right { more labor is demanded at each wage. When output price falls, less labor is demanded at each wage.
Technological change causes the MPL function to change, generally to in- crease at each level of L. This shifts the labor demand curve to the right.
For instance between 1960 and 2000 the average hourly output produced by
US workers rose by 140 percent.
However, it is also possible for technological change to shift labor demand to the left. If for instance a cheap industrial robot is installed in the production process for some industrial good, the marginal product of labor could decrease because the robot can replace labor. Such a technological change is called labor- saving. Most technological change seems to be labor-augmenting { it raises the marginal product of labor. This can explain the fact that employment has risen historically along with wages. In ation-adjusted wage increased by 131 percent from 1960-2000, and rms also increased amount of labor employed by
80 percent.
Supply of other factors
The quantity available of other factors of production can a ect the marginal product of labor. For example, if the supply of ladders falls, the marginal product of apple pickers will decrease.
Labor Supply
People face a tradeo between work and leisure. Assume that leisure is en- joyable but work is not.
Leisure has a cost. This is the cost of the work given up to enjoy the leisure.
So the cost of 1 hour of leisure is the person 's hourly wage.
The labor supply curve shows how amount of labor supplied responds to
1
wage. That is, it shows how people 's decisions over leisure and labor change as the opportunity