6.7 Discrimination In The Labour Market

Question 1

What are some examples of why some workers even in the same jobs, can be paid different amounts?

wage differentials-Formal Skills Pay Wages Greatly Dear

Answer 1

• This could be due to differences in:
• formal education
• skills qualifications and training
• pay gaps
• wages and skills
• gender
• discrimination

Question 2

Differences in workers being paid different amounts-formal education

Answer 2

• On average, those with a degree earn more over their lifetime than those who gain just A Levels.

Question 3

Differences in workers being paid different amounts-skills qualifications and training

Answer 3

• Jobs which require more training and education offer higher wages.
• Training workers is expensive for firms, so they compensate for this by offering workers, who have already undergone education and training, higher wages.
• Higher MRP for trained,skilled workers

Question 4

Differences in workers being paid different amounts- pay gaps

Answer 4

• The wage gap between skilled and unskilled workers has increased in the UK recently.
• This is due to technological change and globalisation, which has shifted production abroad

Question 5

Differences in workers being paid different amounts- wages and skills

Answer 5

• Skilled workers produce higher outputs than unskilled workers because they are more productive, so the demand for their labour is higher.
• higher MRP means they can demand higher wages.

Question 6

Differences in workers being paid different amounts-gender

Answer 6

• Even with equal pay laws, women still earn less than men on average in the same jobs.
• This could be due to career breaks and fewer hours worked on average than men (maternity leave) or because women are crowded into low-paid or part-time jobs, which may only require low skill levels.
• Lower MRP for women=lower wages
• Women could also be discriminated against when it comes to promotions, which effectively locks out higher paying jobs.
• There are inequalities with paternity and maternity leave
• 26% of 1500 workers felt that they had been held back from a promotion because they had children.
• Although a wage gap still exists, it is
  narrowing, albeit slowly.

Question 7

Differences in workers being paid different amounts-discrimination

relate to ethnicity

Answer 7

• Workers might be discriminated against due to age, disabilities, gender and ethnicity.
• Workers from ethnic minorities have faced prejudice and discrimination:
• minority groups on average are less qualified so they have a lower MRP
• lack of language proficiency reduces productivity and employability especially in higher paid occupations
• living in poorer areas of the country
• concentration of ethnic worlers is high in low paid sectors
• reluctance to migrate to earn more

Question 8

Advantages of wage differentials

ITEEP

Answer 8

• Incentivise: skills, training and qualification to earn higher wages
• Trickle down effect: jobs-spending-tax revenue for gov
• Encourages enterprise
• Encourages work not welfare
• Promotes efficient resource allocation

Question 9

Disadvantages of wage differentials

ITG

Answer 9

• Income inequality
• Trickle down effect may not occur
• Government solutions limited if they are the monopsonist employer

Question 10

Evaluation of wage differentials

Answer 10

• How much inequality? (compare costs, benefits)
• Risks of government failure
• SR vs LR costs