Unit 18:Differences in earnings

• Wage determination: demand and supply of

workers in an occupation
Doctors Higher Lower supply Higher pay Qualification
demand and longer
period of
training

cleaners Lower demand High supply Low pay Does not

require above
skills

Note: as few people want to work as cleaner-high pay

Factors Unskilled workers Skilled workers Results

Qualification Paid less Paid more Highly productive &

Vice-versa
Supply more Less Wages are paid
more &vice-versa
Demand less More More output and
price for which
output is sold

Note : hazardous SS-less Sectors: agriculture Public sectors and

occupation Wages-paid more and manufacturing private sectors
 Relative bargaining power of
employers and workers
• TU- an association which represents the interest of a
group of workers
• Wages are likely to be higher in occupations where
workers have strong bargaining power relative to
employers
• Doctors and lawyers- belong to professional
organization – their bargaining position is strengthened
by knowledge whereas cleaners and waiters do not
belong to a workers organization .
• If workers belonging to trade union – collectively
bargain on their behalf- improvement in wage rate and
working condition
 Government policies
• National minimum wages(NMW)-
wages that is fixed by the government
for an hours work
• NMW- set above equilibrium wage rate

NMW Wage Consequences

Causing W-W1 Supply> demand for

unemployment labours

Rising W-W1 higher wages increase

employment their motivation and
productivity-higher
demand for goods- dd
for labour also
increases
Notes: NMW- create another problem –previously
being paid a wage at or just above that level- press
for a wage rise- wage differential
 PUBLIC OPINION
• Jobs- long pd of study, qualification, train-
highly rewarded- held in high esteem(doctor)
• Jobs- no qualification, train- low esteem(
cleaner)
• PO Can put a pressure on government to
revise the wages it pays to the public sector
workers- nurses = rewarded to that of doctor
so government may feel compelled to raise
nurses pay.
 Discrimination
When group of workers treated unfavorably
EWTP(EMPLOY,WAGE, TRAIN, PROM)
WOMEN-LESS QUALIFIED
LOW PAID OCCUPATION
NOT BELONG TO TU – TAKE CARE OF
PERSONALHH ACTIVITIES AND PROFESSIONAL
MEN ( BREAD WINNER) AND WOMEN
(SUPPLEMENTARY)