WORKERS

Demand for Labour

Supply of Labour
FACTORS AFFECTING AN INDIVIDUAL'S CHOICE OF OCCUPATION

The occupational choices of workers are influenced by a range of

wage and non-wage factors.
The wage factors include: wages, salary, commission, bonus, piece
rate pay, performance related pay (PRP), share options.
The non-wage factors include: job security, Job satisfaction, hours of
work, holiday entitlements, promotion prospects, quality of work
environment, fringe benefits (free medical insurance, company car,
price discounts on company's products, etc.), pension entitlements,
distance from home to workplace, career prospects, status.
 WAGE DETERMINATION
1. Influences of demand and supply of labour
The demand for Labour Supply of labour
The demand for labour is defined as the It is the number of workers who are
number of workers that a firm is willing willing and able to work at a given wage
and able to employ at a given wage rate rate.
Factors that influence the demand for Factors influencing the supply of labour
labour i. Training period
i. The price of the product being ii. Wages in other occupations
produced iii. Changes in migration policy
ii. The demand for the final product iv. Income tax levels
iii. The ability to substitute capital v. Working conditions
(machinery) for labour
vi. Trade union power
iv. The productivity of labour
vii. Social trends
2. Relative Bargaining Power 3. Government Policy
Workers have different degrees of Government often intervenes in the
bargaining power when it comes to labour market by setting a minimum
negotiating wage increases with their wage. They do this in order to improve
employers equity & avoid the exploitation of
workers.
The following factors influence their
A minimum wage is a legally imposed
bargaining power:
wage level that employers must pay
i. Membership of a trade union their workers. It is set above the market
ii. Age & experience rate.
iii. Level of education A government may decide to do this to
reduce the extent of poverty in a
country.
The disadvantage to this is that a
minimum wage could raise the costs of
production for firms
Diagrams showing wage determination and minimum
wage
Wage Determination Minimum Wage
 REASONS FOR DIFFERENCES IN EARNINGS (WAGE
DIFFERENTIALS)
1. Gender pay differences 2. Industrial/economic sector pay
Men often work full-time while differences
women frequently work part-time Primary sector workers: Low wages due
due to motherhood or childcare to unskilled nature of work and low
responsibilities. profitability of raw materials.
Men typically experience continuous Secondary sector workers: Higher
wages as they add value to raw
career progression, while women materials, resulting in products with
may have interruptions for family greater profitability.
duties, leading to missed
advancement chances. Tertiary sector workers: Highest wages
due to highly valued skills required for
Women are more inclined to accept complex and expensive
lower-skilled or lower-paying jobs to products/services like artificial
accommodate childcare needs. intelligence coding.
3. Public-private sector pay gap: Public sector jobs may have higher
wage rates, but occasionally public sector wages are lower due to the
compensation of job security and pension prospects.
4. Skilled vs. unskilled workers: Skilled workers earn more because of
their higher productivity, efficiency, and lower error rates.
5. International wage differentials: Developed countries typically offer
higher wages due to high incomes, abundant skilled workers, and high
demand for goods and services, whereas less-developed economies
have lower wages due to a surplus of unskilled labor.
 DIVISION OF LABOUR & SPECIALISATION
Division of labour is the concept of breaking the production process into different
stages/tasks and each stage/task is undertaken by an individual/a group of individuals so
that workers can specialise in specific tasks.
Specialisation can be defined as the process whereby individuals, firms, economies
concentrate on producing those products in which they have an advantage.
Advantages and Disadvantages of Division of Labor and Specialization
1. To Workers:
Advantages:
Quick acquisition of specific skills.
Recognition and status for skill proficiency.
Disadvantages:
Repetitive and monotonous work.
Limited opportunity for skill diversification.
Risk of unemployment if replaced by capital due to limited skill base.
2. To Firms: 3. Economy:
Advantages: Advantages:
Shorter training time for new workers. Increased exports fostering economic
Increased output leading to higher sales and growth.
profits.
Higher income and improved standard
Enhanced labor productivity reducing unit of living.
costs and boosting competitiveness in
international markets. Diversification of goods through
Disadvantages:
imports, enriching variety in the country.
Decline in worker motivation due to Disadvantages:
boredom. Over-reliance on foreign resources. This
High staff turnover as workers seek more may cause problems if conflict arises
engaging opportunities. Depletion of domestic resources due to
Risk of inability to compete in global specialization, accelerating resource
markets leading to business closure and depletion.
structural unemployment.