The job offer represents the number of people who offer their labor services in the labor market .
In relation to the labor or labor market , it is the market where the production factor of labor is bought and sold.
On the one hand, the supply of labor consists of all workers who sell their labor effort in the market labor .
Likewise, demand is for all companies that require workers to develop their production process.
On the other hand, the price or remuneration in the labor market is called salary and represents the amount of money the employee receives for working within a company.
How the amount of work offered behaves
Of course, when we analyze how the quantity of supply behaves in the labor market, we realize that it behaves like in any other market.
To understand it better, let’s look at the following graph representing the job market for systems engineers.
- Dis the number of companies that want to hire systems engineers.
- Sis the number of systems engineers who offer their labor services in the market.
- Wis the remuneration of work or the salary that companies pay and receive by system engineers.
- Lis the amount of the work factor that is available for purchase and sale.
In effect, the graph indicates that in market conditions the equilibrium salary is $ 30, if the payment will be made in dollars and the equilibrium amount would be 300 engineers hired in the market.
1. Faced with an increase in salary
Either way, the quantity of labor offered is a function of price. That is, if the salary increases to $ 40, the quantity offered or the number of engineers who intend to work will increase to 400 engineers who intend to be employed.
This case is observed in the graph below, where we observe a new intersection point on the supply curve, at the price of 40 there is a quantity supplied of 400 engineers.
2. In the face of a drop in wages
While if the salary drops to $ 20, fewer engineers want to be hired at that price, so only 200 systems engineers would intend to work.
So the following graph shows us on the supply curve a new point of relation to the price of 20 there is a quantity supplied of 200 engineers.
Consequently, we can understand that the price and the quantity supplied have a directly proportional relationship, if the salary increases, the quantity supplied also increases.
In the same way, if the price of wages decreases, the quantity offered in the labor market also decreases.
How the job offer shifts
Furthermore, the labor market could also be affected by complete movements in the labor supply, and both the increase and the decrease in the labor supply will have an impact on the price of the production factor.
1. Movement of supply to the right
Of course, if we continue analyzing the previous market, for systems engineers and consider that this year 100 systems engineers graduate from different universities in the country and they begin to send their resumes because they want to join the labor market.
Therefore, this would make the price of wages decrease, because the factor of production becomes relatively more abundant.
Given that this situation is illustrated in the following graph, when the displacement from S to S1 occurs, which causes the increase in supply produces a decrease in the wage.
2. Movement of supply to the left
Now, if what happened were that 50 system engineers migrate to other countries because they have been hired by international companies.
So, this would cause the salary to increase, because the systems engineers would be relatively scarcer within the country and the companies that want to hire them, will have to pay higher salaries.
Since we can see this in the graph below where S moves to the left, the line represented by S1 and this causes the salary to increase at the new equilibrium point.
Consequently, if the labor supply increases, the equilibrium wage decreases. But if the supply of labor decreases, the price of wages increases.
In other words, supply and price move inversely, more supply implies a lower salary and less supply corresponds to a higher salary.
Why is there so much difference in wages?
It turns out that in all countries there are gaps between wages, there are workers who have very high wages and other very low wages.
In reality, these differences occur because if we realize there is a greater supply of unskilled workers, for that reason, as we could see in the graph, it makes wages lower, because workers are relatively more abundant.
In contrast, skilled workers are scarcer in any market, so that, being relatively scarcer, their remuneration will be higher.
For example, if we see him in the medical field, a general practitioner earns less than a neurologist. Because there are more general practitioners, relative to neurologists who are more specialized and therefore more scarce; which makes your salary higher.
To finish, we understand that the labor market behaves like any other market, so that the quantity offered and demand, also depend on the price. Even so, there are exceptional cases that could modify wages without necessarily having a movement on the part of claimants and suppliers. For example, government intervention. Then that could have effects on supply and demand.
The quantity demanded moves inversely proportionally and the quantity supplied directly proportionally.
We can also notice that wages change when supply increases or decreases; as well as the demand for labor, changing the equilibrium price. Lower demand and higher supply cause wages to drop; while more demand and less supply make wages increase.