care benefits, and welfare policy. For example, child care benefits may increase the labor supply of

working mothers. Long term unemployment benefits may discourage job searching for unemployed

workers. All these policies must therefore be carefully designed to minimize any negative labor

supply effects.

TABLE 4.3 Factors that Can Shift Supply

A change in salary will lead to a movement along labor demand or labor supply curves, but it will not shift

those curves. However, other events like those we have outlined here will cause either the demand or the

supply of labor to shift, and thus will move the labor market to a new equilibrium salary and quantity.

Technology and Wage Inequality: The Four-Step Process

Economic events can change the equilibrium salary (or wage) and quantity of labor. Consider how the wave of

new information technologies, like computer and telecommunications networks, has affected low-skill and
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