Factors affecting demand for labour (Labour markets)

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Factors affecting demand for labour (Labour markets)

This article explores some of the factors that affect the demand for labour. The term ‘labour’ refers to practical work, especially when it involves hard physical effort. It also refers to workers who do practical work with their hands (Cambridge Dictionary, 2021).

What is demand for labour?

Well, it is the number of labour-hours an employer needs to hire at a given point in time based on different variables. For example, an employer needs a total of 20 hours of work from employees to run a day of operations.

The labour markets in the USA, and the UK

According to Statista (2021) around 160.74 million people had jobs or were looking for employment opportunities in the USA in 2020. On the other hand, 31.6 million people were employed in the UK in the three months to February 2021. The labour markets in both countries suffered badly due to lockdowns; however, positive signs of recovery have already emerged.

Factors affecting demand for labour

Some of the factors that affect the demand for labour are outlined as follows:


If the wage rate goes up in a country, the demand for labour will go down accordingly. The logic here is that if the price of something goes up, people will be unwilling to buy much of it. Therefore, some people argue that if the minimum wages go up, many employers will be unable to pay their employees accordingly thereby creating less demand for labour.

Marginal productivity

The demand for labour is a derived demand meaning that it hinges on the demand for the products/services the workers are producing. For instance, hospitals must hire more doctors, nurses, and health care professionals, if they receive more patients. Likewise, if there is an increase in demand for help and support in Maths outside school, it will lead to an increase in demand for private Maths tutors.


Technology has vastly changed the way people work. Technological disruptions happen often creating both positive and negative impacts for the labour market. These disruptions can increase the demand for some people while reducing the demand for others. For example, thousands of workers have lost their jobs because of the introduction of the self-check-out machines in supermarkets. On the other hand, increase in demand for a variety of apps has increased the demand for mobile app developers.

According to the World Economic Forum, cited in Kelly (2020) new smart machines, and robotics may potentially replace a huge number of jobs that workers do currently in different industries. Smart technologies will surely bring economic benefits; however, human cost (job losses) will be high as well.

Profitability of organisations

Organisations will be willing to recruit more people if their business is profitable. On the other hand, if the profitability suffers, they may be unwilling to recruit workers thereby reducing the demand for labour.

We hope the article ‘Factors affecting demand for labour (labour markets)’ has been useful. You may also like reading Types of economy (Economic systems). Other relevant articles for you are:

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Last update: 03 May 2021


Cambridge Dictionary (2021) Labour, available at: https://dictionary.cambridge.org/dictionary/english/labour (accessed 03 May 2021)

Kelly, J. (2021) U.S. Lost Over 60 Million Jobs—Now Robots, Tech And Artificial Intelligence Will Take Millions More, available at: https://www.forbes.com/sites/jackkelly/2020/10/27/us-lost-over-60-million-jobs-now-robots-tech-and-artificial-intelligence-will-take-millions-more/?sh=162113071a52 (accessed 02 May 2021)

Statista (2021) Civilian labour force in the United States from 1990 to 2020, available at: https://www.statista.com/statistics/191750/civilian-labor-force-in-the-us-since-1990/ (accessed 03 May 2021)

Author: Joe David

Joe David has years of teaching experience both in the UK and abroad. He writes regularly online on a variety of topics. He has a keen interest in business, hospitality, and tourism management. He holds a Postgraduate Diploma in Management Studies and a Post Graduate Diploma in Marketing Management.