The Labor Force Expands

The Labor Force Expands, step by step

1. 1

   Start on the frontier

   The frontier shows the largest combinations of Good X and Good Y this economy can produce with its current resources and technology, all fully and efficiently employed. Labor is one of those resources, alongside land, capital and entrepreneurship.

2. 2

   More workers arrive

   Population growth and immigration add several million people to the labor force. These are workers the economy did not have before, so this is an increase in the quantity of a resource, which is one of the two causes that can move the frontier itself.

3. 3

   The frontier shifts outward

   With more workers available, the economy can produce more of both goods than before, so the whole frontier shifts outward. The gain comes from having more labor to employ, not from squeezing more out of the workers already there.

4. 4

   Unemployment is a different story

   Contrast this with unemployment. If workers the economy already had were sitting idle, it would be producing at a point INSIDE its frontier, wasting resources it owns. Putting those workers back to work moves production from that inside point out toward the curve, but it does not move the curve. Only a change in the quantity or quality of resources, or in technology, shifts the frontier itself.

Where it ends up

Adding workers increases the quantity of a resource, so the frontier shifts outward. Re-employing workers the economy already had is a move from inside the curve toward it, not a shift.

Now draw it yourself

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

• Automation Lifts Both Industries →
• Flood Wipes Out Machinery →
• A Decade of Building Capital →

More Production Possibilities walkthroughs

• A Technology Breakthrough →
• A Decade of Building Capital →
• An Earthquake Destroys Factories →