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SubjectFree lesson

Labour

ClassNotes Team 5 MIN READUPDATED 27 JUN 2026

Economics SSS 2 First Term

WEEK 8

Labour

Performance Objectives

Student should be able to:

  1. Explain the meaning of the labour market and labour force.
  2. Explain demand for and supply of labour.
  3. Highlight factors affecting demand and supply of labour
  4. Explain wage determination.

Content

Labor Market: is defined as a market in which buyers and sellers of labour are in close contact during which the wages and other conditions of services are determined and agreed upon.

Labour force: This refers to the total number of people of working age in a country who are able and willing by law to work. It is the active or working population and it comprises all persons who have jobs and those who are seeking for jobs in the labour market. They are usually found between the age brackets of 18 to 65 years. Working population varies from one country to another.

Demand for labour

Demand for labourer may be defined as the total number of workers employers are willing and ready to employ or hire at a particular time and even wage rate. The demand for labour is derived demand because labour is not required for its own sake but for what it can help to produce.

Factors Affecting the Demand for labour

  1. The size of the market: If the size of the market for goods and services is large, the demand for labour will equally be large and vice versa.
  2. Wage rate or price of labour: The wage rate for labour can affect the demand for labour because if labour is willing to take a low wage rate, the demand for labour will be high.
  3. Efficiency of labour: If the efficiency i.e. the productive capacity of labour is high, there will be more propensities for the employer to engage more labour to increase output and make more profit.
  4. Demand for goods and services: The pattern for the demand of goods and services in a country can stimulate an increase in the demand for labour.
  5. The numbers of industries: the higher the number of industries the higher the demand for labour and vice versa.
  6. State of employment: if the economy has reached it full employment kevel then the demand for labour will reduce but if there is under-employment there will need to demand for more labour.

Supply of labour

Supply of labour may be defined as the total number of people of working age offered for employment at a particular time and a given wage rate. Alternatively, the supply of labour can be defined as the services of labour available in the labour market.

Factors affecting the supply of labour

  1. Higher wages: This usually will encourage a worker to supply more labour because work is more attractive compared to leisure.
  2. Difficulty of getting qualification: if it is difficult to get particular qualifications, the supply of labour will be affected.
  3. Demographic changes and migration: Some jobs like picking of fruit are unpopular with native-born workers and rely on immigrant labour. If immigration slows- down, there can be a shortage in supply of labour for such industries.

Wages

Wages refers to the payment made to labour for the services they render during the production process. Alternatively, wages refers to the rewards paid for the services of labour.

Types of wages

  1. Nominal wages: This refers to the total amount of money paid to a labourer at a particular period.
  2. Real wages: this refers to the total amount or quantity of goods and services the labour can use his money to buy. Real wage can also be referred to as the purchasing power of labour.

Wage Rate

Wage rate can be defined as the rate at which labour is paid for the services it renders in production.

Types of wage rate

  1. Time rate system: This refers to a system in which wages paid to labour are based on the number of hours worked. Time rated wages apply to workers whose wages are paid on an hourly, daily or monthly basis.
  2. Piece rate system: This system is concerned with the wages paid to labour based on the work done. In this system, payment to workers is related to the work done or output.

Determinate of wages

Wages can be determined through the following:

  1. The forces of demand and supply in a market economy: The wages of labour in a market economy can be determined through the forces of demand and supply. Wage rate in competitive labour market can be determined in the following ways:
  1. When the supply of labour exceeds the demand, the wage rate will fall.
  2. When the demand for labour exceeds the supply, the wage rate will rise.
  3. When the demand for labour equals the supply, the wage rate will be favourable to both the employer and the employee.  
  1. Government activities and policies: Government institutions and wage commissions set up by the government help in determining wages, especially in the public services. In fixing wages, the government agency or wage commission takes; cost of living, level of productivity and type of occupation into consideration.
  2. The activities of trade unions: A trade union is an association of workers formed to enable the members to take collective, rather than individual, action against their employers in matters relating to their welfare and conditions of work.