18.

WORKERS
 LEARNING OBJECTIVES

• Analyse wage & non-wage factors affecting choice of

occupation
• Explain how wages are determined
• Use demand & supply diagrams for labour markets
• Discuss reasons for differences in earnings
• Evaluate division of labour for workers, firms & the
economy
 CHOICE OF OCCUPATION –
OVERVIEW

• Occupational choice influenced by:

1. - Wage factors (monetary)
2. - Non-wage factors (non-monetary)
3. - Limiting factors (constraints such as skills & mobility)
 WAGE FACTORS – 1.EARNINGS

• Earnings include: basic wage/salary, overtime pay,

bonuses, commission
• Higher wages attract more workers into the job
• Example: doctors vs cleaners
• Wage systems: Time-rate vs Piece-rate
 TIME-RATE VS PIECE-RATE

• Time-rate: Pay based on hours worked

• - Advantage: predictable costs, fair to workers
• - Disadvantage: no reward for effort
• Piece-rate: Pay based on output
• - Advantage: incentive for productivity
• - Disadvantage: quality may fall, health risks if
overworked
 2. OVERTIME, 3.BONUSES
4.COMMISSION

• Overtime: Paid at higher rate; benefits workers & firms,

but may cause fatigue
• Bonuses: Extra payment for high output or
performance; may demotivate others if unfair
• Commission: Payment as % of sales; common in retail &
real estate
 NON-WAGE FACTORS
(PART 1)

• .1Job satisfaction: e.g. teaching, nursing

• 2.Type of work: manual vs non-manual, safe vs
dangerous
• 3.Working conditions: pleasant environment, friendly
colleagues
 NON-WAGE FACTORS
(PART 2)

• 4.Working hours: full-time, part-time, flexible, shifts

• 5.Holidays: legal entitlements vary; teaching offers long
breaks
• 6.Pensions: public sector often provides better
pensions6.
 NON-WAGE FACTORS
(PART 3)

• 4.Fringe benefits: housing, healthcare, meals, insurance

• 5.Job security: long-term contracts vs casual work
• 6. Career prospects: promotion opportunities
• 7. Size of firm: larger firms offer better pay & benefits
• 8. Location: proximity to home reduces travel costs
 LIMITING FACTORS

• Qualifications & training required

• Skills & experience
• Occupational mobility (ability to change job types)
• Geographical mobility (ability to move for work)
• Opportunity cost of choosing one job over another
 WAGE DETERMINATION -
DEMAND & SUPPLY

• Wages determined by demand for and supply of

labour
• High demand + low supply → higher wages (e.g.
doctors)
• Low demand + high supply → lower wages (e.g.
cleaners)
• Equilibrium wage = where demand = supply
 DIFFERENCES IN
EARNINGS

• Skill level & qualifications

• Productivity & experience
• Job risk & unpleasant conditions
• Discrimination (gender, race)
• Public vs private sector differences
• Union membership & bargaining power
• 1 a $80 000 is one quarter of $320 000. So, pilots in Brazil were paid $80
000.
• b The shortage of pilots in China would be expected to push up the wages
of pilots in Brazil.
• This is because some Brazilian pilots may go to China, creating a
shortage in Brazil.
 OTHER INFLUENCES ON
WAGES

• Relative bargaining power of workers & employers

• Trade unions: collective bargaining for better pay
• Government policies: e.g. minimum wage laws
• Public opinion: jobs requiring training often valued
higher
 MINIMUM WAGE POLICY

• Sets a wage floor; illegal to pay less

• Raises pay of low-income workers
• Can cause unemployment if set above equilibrium
• May increase productivity & demand if workers are
motivated
• Public sector often influenced more by minimum wage
laws
INDIVIDUAL ACTIVITY 2
• 2 a Demand is high.
• b Supply is low.
• c Workers have strong bargaining power.
• d Workers are skilled.
 DIVISION OF LABOUR -
ADVANTAGES

• Workers: higher skills, higher wages

• Firms: higher efficiency, lower costs, faster training
• Economy: higher output, trade opportunities, growth
 DIVISION OF LABOUR -
DISADVANTAGES

• Workers: boredom, unemployment risk if skills outdated

• Firms: overdependence on workers, quality may suffer
• Economy: over-specialisation, structural unemployment
risk
 RECAP & QUICK
QUESTIONS

• What are the main wage and non-wage factors

influencing job choice?
• Why do skilled workers earn more than unskilled
workers?
• How can government policies affect wage
determination?
• What are the pros and cons of division of labour?