Workers
Occupations and Earnings
Most people work at some point in their lives. An individual's choice of occupation depends on many
factors, which can be categorised as wage and non-wage factors. What influences a person’s choice
of occupation?
Wage Factors
Firms advertise a wage rate for jobs to attract people to supply their labour. They can be paid for in
many ways:
Non-wage Factors
Some jobs don’t necessarily offer high wages yet people are still attracted to them for other reasons
such as:
• Level of challenge - does the job require thinking skills or is it repetitive and boring?
• Career prospects - will there be progression within the firm or will a person have to change jobs to
be promoted?
• Level of danger involved - is the job dangerous? For example, some people face a high degree of
risk at work, such as lifeboat rescue teams, firefighters, window cleaners and scaffold erectors.
• The length of training required - Some jobs require few skills, such as cleaners and shop assistants.
By contrast, other jobs require years of training, such as electrical engineers, plastic surgeons, pilots,
accountants, lawyers and dentists.
• The level of education required - Some jobs require no or minimal education whereas other jobs
require post-graduate levels of education (such as university professors).
• Recognition in the job - does the worker get praise and recognition for their performance at work?
If a worker feels respected at work, they may be motivated to work harder.
• Personal satisfaction gained from the job - This is important because if a worker feels satisfied and
happy in their work, they may work harder and stay in the job longer.
• The level of experience required - Some jobs require no or minimal experience whereas other jobs
require a minimum amount of experience (such as judges and law-makers).
•Other factors include work environment, travel distance/benefits, job security, training
opportunities, fringe benefits & pension entitlement
Wage determination
The wage rate is the price for labour, like any other price in Economics, it is determined by demand
and supply.
The demand for labour
The demand for labour is a derived demand. This means that labour is demanded for the goods and
services it produces and not for itself. For example, the demand for teachers is dependent on the on
the demand for education. The demand curve for labour is downward sloping, as the wage rate
increases the quantity of labour demanded decreases.
The supply of labour
The labour supply in an economy consists of people who are of working age and who are willing and
able to work. The supply curve for labour is upward sloping, as the wage rate increases the quantity
of labour supplied increases.
The equilibrium wage rate is We and Qe quantity of labour is employed.
Question: Analyse the effects of the following on the wage rate and level of employment:
- Increase in labour supply
- Decrease in labour supply
- Increase in demand for labour
- Decrease in demand for labour
Factors affecting demand for labour
Factors affecting supply of labour
Effect of government policy on wages
The equilibrium wage rate before the national minimum wage is W1 and N1 workers are demanded
and supplied. If the government introduces a national minimum wage (NMW) at W2, above the
equilibrium wage W1, the quantity of labour supplied increases from N1 to N2 as more workers are
prepared to work for a higher wage rate. The quantity of labour demanded, however, falls from N1
to N3 because firms (employers) are less able or willing to pay as many workers at a higher wage
rate. There is a surplus of labour(unemployment) at a wage rate W2 equal to N3N2.
Why do some occupations earn more than others?
• Different abilities and qualifications – some jobs (e.g. an accountant) require more training and
qualifications than those that don’t. As supply is likely to be more limited due to the necessity of
training, the wage will be higher.
• ‘Dirty’/Risky jobs and unsociable hours – this type of work usually offers a high wage to attract a
supply of labour.
•Job Satisfaction – a job that is viewed by many as a rewarding occupation (e.g. nursing), attracts a
large supply of labour. This results in low market wage rates.
•Lack of information about jobs and wage – some workers may work for less than they could in
other jobs as they are unaware of better paid jobs elsewhere.
• Labour Mobility – when workers can move easily between countries. If a worker can move easily,
they can easily move to the job that offers that most pay.
•Trade unions- The differences in the strength and effectiveness of trade unions also account for
differences in wages in different industries. Workers who belong to powerful trade unions are paid
more. Trade unions raise wages by restricting labour supply or increasing demand for labour.
• Government policies- the gvt may directly affect wages to increase or reduce labour supply in
certain professions.
Differences In Earnings Between Groups
Changes in earnings over time
• Entry to the workforce: A young employee will receive relatively low earnings, This is largely
because of a lack of work and skills and experience. They can gain skills through apprenticeship,
management training schemes or other training opportunities.
• Skilled workers: The more experience an employee has, the more opportunities there are to
increase earnings as the more skilled a worker becomes, the greater the demand: more skilled
employees will be in shorter supply and they will be able to command higher earnings. Higher wages
must be offered to attract highly skilled workers.
• End-of-career employees: Employees may not keep up to date with changing trends or
technologies and therefore have outdated skills, and their wages may decrease. Due to their long-
time commitment to a business, they may continue to get high wages.
Specialisation – when a person or group focuses on producing one main good or service.
Specialisation occurs when a worker becomes an expert in a particular profession, such as a
landscape architect, a psychiatric nurse, an electrical engineer or an economics professor.
