The key role of labour supply

Faster growth in labour supply (similarly, a rise in the participation rate) leads to: An increase in potential growth; An easing of the labour market, and therefore lower wage and price increases, with an obvious effect on monetary policy. Thus, there is now a significant asymmetry between the United States, where labour supply is declining, and the euro zone, where it is increasing. We therefore seek to identify the determinants of labour supply (the participation rate) among the possible determinants: The retirement age; The level of low wages; Wealth (which leads to early retirement if it is high); Employee employability; The level of non-work income. A comparison of OECD countries shows that the level and variation in the participation rate are positively correlated with the retirement age, employee skills and negatively with the level of non-work income.