Chapter 18- Workers

Question 1

Earnings

Answer 1

the total pay received by a worker

Question 2

Wage rate

Answer 2

a payment which an employer contracts to pay a worker. It is a baisc wage a worker receives per unit of time or unit of input

Question 3

National Minimum Wage (NMW)

Answer 3

a minimum rate of wage for an hour’s work, fixed by the government for the whole economy

Question 4

Wage differential

Answer 4

th differences in wage

Question 5

Primary Sector

Answer 5

covers agriculture, fishing, forestry, mining, and other industries which extract natural resources

Question 6

Secondary Sector

Answer 6

covers manufacturing and construction industries

Question 7

Tertiary Sector

Answer 7

covers the industries which provide services

Question 8

Elasticity of demand for labor

Answer 8

a measure of responsiveness for labor to a change in the wage rate

Question 9

Elasticity of Supply of Labor

Answer 9

a measure of the responsiveness of the supply of labour to a change in the wage rate

Question 10

Specialisation

Answer 10

the concentration on particular products or tasks

Question 11

Division of labor

Answer 11

Workers specialising in particular tasks

Question 12

Wage factors: Wages

Answer 12

normally higher the wage rate offered for a job, higher the demand for it. Wages of most workers are based on a standard number of hours. Some are determined by the number of hours worked or the amount produced. The wages based on a standard number of hours benefit producer as estimating labor costs and dealing with negotiations becomes easy. The time rate system doesnt reward harworkers as all workers work fot the same amount of time and get paid the same. This is fixed by the piece rate system, but is only used in industries where measuring units produced per worker is easy. One disadvantage of this is that workers may prioritize quantity over quality in order to obtain higher wages.

Question 13

Wage factors: Overtime pay

Answer 13

this may be paid to workers who work in excess of the standard working week and is usually paid at a higher rate. This is beneficial to both parties as workers are able to earn more with the same job and employers dont need to take on more workers when demand rises until they are sure that it will last. There is a risk that the workers will become tired and their overall and quality of production will fall. Some employers have noticed that if workers know that they will be working overtime, they put in less effort in each our.

Question 14

Wage factors: Bonuses

Answer 14

A bonus is an extra payment payed to a worker who produces above a standard amount or contributes to higher profit. It provides incentives for workers to produce good quality and quantity of products. But this may backfire and lead to resentment of workers who receive bonuses by those who dont. It can also lead to people becoming demotivated if they dont receive bonuses and some may even quit.

Question 15

Wage factors: Commission

Answer 15

This is often paid to sales people and involves them receiving a proportion of the value of the sales they make.

Question 16

Non- wage factors

Answer 16

Job Satisfaction
Type of Work (non-manual or manual)
Working Conditions
Working Hours
Holidays
Pensions
Fringe Benefits (extra benefits provided to workers by their employers)
Job security
Career Prospects
Size of Firms (people are attracted to jobs in large firms)
Location

Question 17

Limiting Factors

Answer 17

Qualifictaions
Skills
Job experience
Occupational Mobility
Geographical Mobility

Workers need to reject other job opportunities to accept one. They must decide whats more imporatant to them and look at the opportunity cost. For eg: someone may be able to sacrifice a high pay job, for a job with lower pay but more job satisfation.

Question 18

Wage determination and the reasons for differences in earnings (part 1)

Answer 18

Demand and Supply:
Higher the demand for and lower the supply for workers in an occupation, higher the pay is likely to be. Unskilled workers are paid less than skilled workers because skilled workers have higher demand and the supply is lower. Demand for workers is determined by the amount of output that can be produced and the price for which the output can be sold.

Relative Bargaining Power of Employers and Workers:
Wages are likely higher in occupations where workers have stronger bargaining power than their employers. This is ilkely to be the case if the workers are part of a trade union. This is more common in public sector workers than private sector workers.

Government Policies:
Government directly affect wages of workers in the public sector, but also affect the wages of those in the private sector. Policies that push economic growth tend to increase wages as they increase the demand for labor. Another example of government policies affecting all workers is national minimum wage. It is implemented to raise the wage of low-paid workers and reduce poverty. Some policies can also affect specific jobs. Eg: if the government imposes a law that people need to reatke their driving test every 10 years, the demand for driving instructors will increase, thereby increasing their wages.

Question 19

Wage determination and the reasons for differences in earnings (part 2)

Answer 19

Public Opinion:
The public beleives that jobs that require long periods of study and training should be highly rewarded. Public opinion can affect wage rates through multiple methods. One method is wage claims made by workers. Eg: firement consider their labor as valuable as the labor of police, so if there is an increase in wages of the police, they would argue that their wages be incresed as well. Public opinion can also put pressure on a government to revise the wages it pays to the public sector workers. Governments are compelled to comply in order to keep their approval.

Discrimination:
This occurs when a group of workers are treated unfavourably in terms of employment, wage rate, training received, or promotional opportunities. An example of this would be employees reluctant to have female workers which would decrease the demand and hence also the pay. Some reasons why women are paid less than men in genral include:

They tend to be less qualified (this is changing, more women go to university than men)
They tend to be more concentrated in lower paying jobs
They are less likely to be part of trade unions or other professional organisations
They are still discriminated against

Question 20

Why earnings of occupations change over time: Changes in demand and supply of labor

Answer 20

If demand for labor increases earnings will likely rise, the wage rate may be pushed up and bonuses may increase along with better overtime payments. Demand for labor can increase becasue of 3 main reasons:

An increased demand for the product
Rise in labor productivity
Rise in price of capital (in some cases capital can be replaced with labor)

A decrease in supply of labor for a particular occupation would rase the wage rate. The 4 main reasons for a fall in supply of labor for a specific occupation include:

A fall in the labor force
A rise in qualification or length of training required to do the job
A reduction in non-wage benefits for the job
A rise in wage or non-wage benefits for other jobs

Question 21

Why earnings of occupations change over time: Changes in the Stages of Production

Answer 21

Workers in the primary sector are generally paid less than workers in the other 2 secotrs as primary sector workers are generally less skilled and have fewer qualifications. In addition, when an economy grows there is less demand for primary sector workers and the demand for secondary sector workers increases after which the demand for tertiary sector workers increases (Some of the higest paid workers are in the tertiary sector).

Question 22

Why earnings of occupations change over time: Changes in Bargaining Power

Answer 22

A change in a trade unions’ bargaining power or willingness to take industrial action can affect earnings. If the bargaining power and willingness to take industrial action increases, wages will also be likely to increase.

Question 23

Why earnings of occupations change over time: Government Policies

Answer 23

Pay of public sector workers is likely to rise if government expands the public sector
Reducing road work may decrease the demand for public sector construction firms and hence decrease wages
National minimum wage
Improved education
Policies on immigration
Anti- discrimination laws
Advancements in technology

Question 24

Why earnings of occupations change over time: Changes in Public Opinion and Changes in Earnings of Individuals Over Time

Answer 24

Changes in Public Opinion:
Over time, how occupations and those who undertake them are viewed can change.

Changes in Earnings of Individuals Over Time:
The earnings of most individuals change over the course of their life. In most cases, earnings increase as people gain more experience, skill and become more productive. An increase in skill also increases the chances of them getting promoted. Some change jobs to get higher pay, while others take on more responsibility. In some cases, earnings may decrease overtime as they switch to less demanding work. Eg: an older worker stops overtime work due to health issues.Th

Question 25

The Extent to which Earnings Change

Answer 25

The magnitude of the change in wage rate due to a change in demand and supply is determined by the magnitude of the changes and the elasticity of demand and supply for labor.

The main determinants for the elasticity of demand of labor are:

Proportion of labour costs in total costs (large proportion is more elastic)
Ease with which labor can be substituted with captital (easier to replace is more elastic)
Elasticity of demand for the product produced (more elastic is more elastic)

The determinants for the elasticity of supply for labor include:

The qualifications and skills required (more is less elastic)
The length of training period (more is less elastic)
Level of Employment (more employed is less elastic)
Mobility of labor (more is more elastic)
Degree of Vocation (stronger the attachment is less elastic)
Time Period (more elastic over time)

Question 26

Specialisation and Division of Labor

Answer 26

Instead of making a wide range of products, a firm may specialize in manufacturing one or a few products. Division of labor is when workers specialize in completing one specific task instead of producing the whole good or service, the main advantage of which is lower cost per unit. Doing the same task repeatedly acts as training and makes the workers more efficient, increasing production. Despite this, specialization has the risk of increasing the cost per unit. Workers may get bored and show up to work less often, they may also take less care of their work. Having specialized staff would make covering for another worker more difficult. Specialized workers can become very skilled and have high demand, allowing them to earn high wages. Concentrating on a specific task also allows workers to pursue their interests. One disadvantage of this is the demand falling for a workers specialized job. They wouldnt have the skills to switch to another high paying job and their wages could fall. If division of labor leads to lower costs of production and higher quality, the econom will be benefitted as it will be able to export more goods and services.