Chapter 18

Workers
Key terms

• Earnings: the total pay received by a worker. (earnings=basic wage +

overtime pay + bonuses + commission)

• Wage rate: a payment which an employer contracts to pay a worker.

It is the basic wage a worker receives per unit of time or unit of

output.
Factors Affecting an Individual’s Choice of Occupation

1. Wage factors (monetary/ pecuniary factors)

2. Non-wage factors (non-monetary/non-pecuniary factors)

3. Limiting factors
Wage factors

An important influence on what jobs a person decides to do, is the pay on

offer.

1. Wages (pay/salaries)

the higher the wage rate on offer, the more a person want to do the job.

• The wages of many workers are based on a standard number of hours.

• a time rate wage system according to the number of hours they work.

• a piece rate wage system according to the amount they produce.

Wage factors

2. Overtime pay is paid to work in excess of the standard working

week. It usually paid at a higher rate.

3. Bonuses in an extra payment, for producing above the standard,

finishing a project ahead etc.

4. Commission is giving a proportion of the value of the sales.

 Non-wage Factors
People do not always choose the highest paid job on offer. They take into account a range of
other factors including:
1. job satisfaction (Nurses, teachers, Brain surgeons, TV presenters and top football players )
2. type of work (e.g. non-manual job, higher paid, high status job)
3. working conditions (e.g. pleasant surroundings, friendly colleagues)
4. working hours (part-time; flexible working hours; shifts)
5. holidays
6. pensions (public sector vs private sector)
7. fringe benefits (free or subsidised meals, health schemes, and social and leisure facilities)
8. job security (redundant; civil servants vs casual workers)
9. career prospects (promotion; trainee accountants, barristers and doctors)
10.size of firm (small and large)
11.Location (closer to their home)
 Limiting Factors

Some occupations are limited by a number factors including the

qualifications, skills, experiences and the place they live.

• The more occupationally mobile and the more geographically mobile

people are, the wider the choice of occupation available to them

• Occupational choice involves opportunity cost, choosing to take up one

occupation needs to rejecting other occupations
 Wage determination
The key factors that determine the amount of pay received by workers and why some workers earn more
than others are the demand for and supply of their labour.
The higher the demand for and the lower the supply of workers in an occupation, the higher the pay is
likely to be.

1. The supply of doctors is low, relative to demand for their services. (qualifications, and the
willingness and ability to undertake a long period of challenging training)
the supply of cleaners would be low and their pay high, as few people would want to work as
cleaners. Because:

1. not a particularly interesting job

2. unsociable hours

3. not very pleasant working conditions and

4. does not usually offer good career prospects.

The supply of cleaners, nevertheless, is often high relative to their demand. because the job:

5. does not require any qualifications,

6. or special skills, and

7. only a minimum amount of training is sufficient.

Unskilled workers are generally paid less than skilled workers. (Demand for
skilled workers is high, whilst their supply is low.)

two main influences on the demand for workers:

1. the amount of output they can produce and
2. the price for which that output can be sold

Characteristics of skilled workers:

3. highly productive
4. producing both a high quantity and a high quality of output per hour.
5. the supply of skilled workers is usually lower than that of unskilled workers.
The reason why dangerous jobs, are well-paid:

There is a limited supply of people who are willing to work as

steeplejacks.

To try to overcome this reluctance a number of employers pay workers

undertaking this job a higher rate than that paid to other building workers.
The supply of workers in the agricultural and manufacturing sectors varies. In a number

of countries, including some Asian and African countries,

1. there is a surplus of agricultural workers which results in lower agricultural

wages.

2. The demand for and price of products made by manufacturing industries tend to

increase at a more rapid rate than those made by primary sector industries. This

helps to keep the demand for manufacturing workers high, relative to agricultural

sector workers.
Demand and supply of workers in the private and public sectors vary

among countries.

In some countries the public sector is expanding, whilst in others it is

contracting. A number of people like working in the public sector

because of greater job security, longer holidays and better pensions

than those offered in the private sector.

2. Relative bargaining power of employers and workers

Wages are likely to be higher in occupations where workers have strong

bargaining power relative to employers.

1. if most of the workers are members of a trade union or professional
organisation (doctors vs cleaners; public sector workers vs private
sector workers)
2. If they would be difficult to replace with other workers
Public sector workers also tend to be affected by government labour
market policies more than their counterparts in the private sector.
(NMW)
3. Government policies

1. Specific government policies (introduced a law requiring car drivers to take a

test every ten years)

2. labour market policies:NMW

 4. Public opinion
Public opinion tends to consider that jobs which involve long periods of study and training should be highly

rewarded.

Public opinion can influence wage rates in a number of ways.

1. through the wage claims made by the workers.

2. Public opinion can put pressure on a government to revise the wages it pays to the public sector

workers.

3. social attitudes are against working women.

5. Discrimination

Discrimination occurs when a group of workers is treated unfavourably in terms of

employment, the wage rate, the training received and/or promotional opportunities
 6. Discrimination
Reasons for women get paid less than men

1. Women tend to work for fewer hours than men

2. women tend to be less well qualified than men, but this is changing in a number of

countries, with more women now going to university than men

3. they tend to be more heavily concentrated in low-paid occupations

4. they are less likely to belong to trade unions and professional organisations
 Why earnings of occupations change over time

The main reason for a rise or, less commonly, fall in earnings is a

change in demand and/or supply of labour.

1. Change in demand and supply of labour

① Change in the demand for labour

If demand for labour increases, earnings are likely to rise.

three main causes for demand for labour to increase:

1. An increased demand for the product. Demand for labour is a derived demand.

The higher the demand for products, the greater is the number of workers

employed.

2. A rise in labour productivity. Higher productivity increases the return from

hiring workers.

3. A rise in the price of capital. In some occupations, it is possible to substitute

labour for capital in the production process.

② Changes in the supply of labour
A decrease in the supply of labour for a particular occupation or sector would be expected to raise the wage rate.
Among the factors that could cause a decrease in the supply of workers are:
1. A fall in the labour force. If there are fewer workers, in general, it is likely that an individual business will
find it more difficult to recruit workers.
2. A rise in the qualifications or length of training required to do the job. This will reduce the number of people
eligible for the job.
3. A reduction in the non-wage benefits of a job. If, for example, the working hours or risks involved in doing a
job increase, fewer people are likely to be willing to do it.
4. A rise in the wage or non-wage benefits in other jobs. Such a change would encourage some workers to
switch from one occupation to another.
2. Changes in the stages of production

People working in the primary sector are usually less well-paid than
those who work in secondary and tertiary sectors.
This is because the workers in the primary sector tend to be
1. less skilled and have fewer qualifications.
2. The demand for primary sector workers declines
3. Changes in bargaining power 议价能力
改变
A change in unions’ bargaining power or willingness to take industrial action
can affect earnings. （工会议价能力和开展工业行动的意愿改变）

• a government removes a ban on agricultural workers forming unions collectively,

it would be expected that the wage rate of agricultural workers would rise.

• In recent years, the greater willingness of UK NHS workers to threaten industrial

action is perceived as one reason why their pay has increased.
4. Changes in government policy
1. Raising the national minimum wage will increase the pay of low-paid
workers.
2. Despite the rise in supply, improved education may actually raise the
wages of skilled workers, as it may increase their demand more than the
supply.
3. Government policies on immigration can also affect wages.
4. The introduction of government anti-discrimination laws may help to
increase the career prospects and wages of disadvantaged groups.
5. Advances in technology can alter wage rates.
 5. Change in public opinion

Over time, how occupations and those who undertake them are viewed can
change.

• For instance, one possible reason why the relative pay of journalists has
fallen in the USA in recent years is a decline in the regard the occupation is
held in.

• In contrast, the pay and job opportunities for women is increasing in Saudi
Arabia where social attitudes about women working are changing.
6. Changes in the earning individuals over time

The earnings of most individuals change over the course of their working life. For most
workers, their earnings increase as they get older.

1. Some workers may switch employers in pursuit of higher pay.

2. Others may agree to take on more responsibility for more pay.

There is a chance, however, that earnings may fall with passage of time.

3. Some older workers may decide to give up working overtime and some may switch
to less demanding work.

4. The firm, or organisation, that people work for, may experience financial difficulties