More Workers Enter, Wage Falls

More Workers Enter, Wage Falls, step by step

1. 1

   Start in Equilibrium

   The competitive labor market begins in equilibrium where labor supply (SL) crosses labor demand (DL = MRP). The wage and the number of workers hired are set at that intersection.

2. 2

   More Workers Become Available

   Immigration or new training expands the pool of people willing and able to do this job. More workers are available at every wage level, so labor supply increases.

3. 3

   Labor Supply Shifts Right

   The larger workforce shifts the labor supply curve rightward. Demand for labor is unchanged because the firm's productivity and output price have not moved.

4. 4

   New Equilibrium: Lower Wage, More Employed

   At the new intersection of the shifted supply with unchanged demand, the equilibrium wage is lower and more workers are employed. A larger labor pool bids the wage down while total employment rises.

Where it ends up

An increase in the supply of workers shifts labor supply right, so the equilibrium wage falls while the quantity of workers employed rises.

Now draw it yourself

Same graph, graded on whether you move the right curve and leave the rest alone.

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