labour market outcomes Flashcards
what is the most important source of income for aus hh?
wages and salaries
what has the most influence on income distribution
wage outcomes produced by LM
average weekly earnings
changes in avg total earnings for all employees measuring avg weekly gross rate of pay (before tax) to all employees (f&pt) + overtime payments
limit of nominal wages to measure wage outcomes
changes in nominal wages dont tell if ppl better off
- dont account changes in price lvls occurring at same time
nominal wage?
pay received by employees in dolalr terms for contribution to PP, not adjusted for inflation
how do you see if ppl are better off with wages over time?
real wages : measure actual purcchasing power of nominal wages (adjusted for increase in lvl inflation)
have real wages been rising/falling?
rising (generally) eg. except covid and russia invasion on ukraine
when can employers afford higher real wages
if theres also strong increases in productivity
- if growth real wages > productivity growth –> REAL LABOUR COSTS rise –> lower profits
how will employers protect profit levels when real labour costs rise?
employ less labour use more tech in production –> ^u/e
have real labour costs been rise/fall?
falling (bc % change nominal wages < combined % change prices + labour productivity
EXCEPTION 2020, wage growth above inflation + productivity growth
labour market is actually…
made up of no. diff micro-markets for each occupation and enterprise so WAGE RATE DIFFERENTIALS occur between markets
wage differentials betw diff occupations
diff occupations require diff lvls edu & skills, reflected by wage differentials
- LM generally receive greater rewards for working in occupations require higher lvl skill and longer period training
- ppl wont spend time & money for edu and skills unless confident occupation result higher wages/job satisfaction
working conditions influencing wage differentials betw diff occupations
less appealing working conditions (dirty, dangerous, irregular hrs)
* paid higher wage rate to compensate for poorer work conditions
occupational mobility
ease labour can move from 1 occupation to another
* influence occupational wage rates
how does occupational mobility affect occupation wage rates?
when OM high, supply labour to occ likely high, less need employers to raise wages to attract labour
if occupation mobility restricted, lower labour supply and wage rates higher
(eg. highly specialised occs eg. surgeons limited OM takes long time to learn skills)
(eg. sales workers have lower lvls skills & training and higher lvl OM)
wage diffs in same occupation
various degrees of experience
-more experienced, qualified workers more valuable, paid more
geographic mobility & how does it influence wage rates within same occupation
easy labour can move from one area to another
- employers diff attract labour to isolated locations
productivity of labour influences wage rates bc`
enterprise bargaining, employees higher wages at ind enterprise lvl exchange for increasing productivity
how capacity of firm to pay influence wage outcomes?
some firms more profitable, greater capacity to pay higher wages
* firms with market power (ability set prices) and earn higher profits able pay higher than firms face greater comp
labour productivity
quantity of output produced un PP per unit of labour per unit of time
age diff in wage outcomes
highest betw 25-64. income lvls generally lower earlier years working life (less edu, exp). income lvls decline as ppl older, rely age pensions
gender in wage outcomes
discrimination by employers ppl fewer job opps and less access to higher paid jobs, –> lower earnings.
* women, ATSI, disabled
equal pay for equal work
since 1969 aus employmnt laws but fails correct imbalance betw men and women wages, women forced reduce paid work hrs to fulfil other roles (children)
equal pay for work of equal value
after epfew require remuneration account quality and quantity of work
3 factors contributing most to gender pay gap
discrimination
interupptions in owrking life (childcare) and working in lower-paid “segragated” industried with high rates female employment
migrant status and cultural background on LM outcomes
wage outcomes for migrants to aus eventually conform ot avg for all aus
- avg income for aus workers with migrant bg 1% < national avg for aus workers (immigrants integrate into workforce quicker than other countries, bc aus migration program targets skilled workers, well paid)
- skilled migrants earn well above national average, higher lvl skills than avg aus workforce
- highest paying occupational categories (managers) workers with migrant bg earn more than average (aus recruits highly qualified workers overseas)
- lowest paying paid higher than workers w/ migrant bg (occupations with lower skill lvls –> less rewards for those w/ skills,
workers who migrated to australia earn higher incomes but receive lower/higher rewards for education than aus born workers. why?
lower rewards because weaker english language proficiency than discrimination. (migrant eng speaking bg likelier earn above avg income and non eng below avg income)
atsi wage outcomes
longer term, higher lvls disadv.
1980s wage determination
through industrial ‘award” decided centrally by gvt appointed industrial tribunal (now FWC) –> diff wage outcomes betw & within occ smaller
early 90s shift from centralised wage determination to…
enterprise bargaining, employers and ees negotaiate wage increases at workplace lvl –> greater diff wage outcomes for industries and individuals
enterprise bargaining
negotiations betw employers and ees abt apy and work conditions at ind firm lvl
income distribution
way eco income spread among members diff socioeco groups
why have relative hh incomes only change slightly since mid 90s?
increased family benefits for lower income earners offset increased wage differentials
inequality in distribution of income in aus grown/fell slightly over past decade
grown
diff wage outcomes across diff industries also result of
changes in structure of eco.
emerging industries require skilled labout (short supply) pay higher wages than declining industries exp lower profits and falling demand for g&sm
income distrubtion w/n occuptions. what contributed this?
increase dispersion of earnings w/n occupations and among employees with same skill lvls/edu qualification
(shifted away from centralised wage determination since early 90s and declining lvl union membership, higher rates membership create similar wagge outcomes for workers doing similar jobs in diff firms & indus but greater variation in wage lvls w/n industries now)
non wage outcomes
benefits employees receive in addition to ordinary and overtime payments (sick leave, super, fringe benefits)
why is there no single measure of non wage outcomes for employees
cant be quantified in dollar terms. vary substantially from one workplace to another. some industries workers earn much more than regular wage bc non wage allowances
types of non wage outcomes
- salary packaging
* wages supplemented w/ other benefits (fringe benefits) company car from employer - bonus cash payments on top of emp’s normal wage
* performance bonus based on company’s profit performance/employee’s individual work perf - improve flexibility for emplyoees in work patterns
* leave more ppl working remotely and from home, more employees living long distance from work
argue for inequality
natural consequence of free market functioning effectively
* each ind received share income according to marginal productivity
- ineq encourages ppl work harder and improvce position in distribution of income
argue against inequ
social costs
* free market capitalism divides society into upper, middle, working, underclass
* underclass limited opp to fulfil potential bc barriers edu, work, social life
income ineq can lead to
increase productive capacity of resources –> ^real GDP per capita. due to the INCENTIVE EFFECTS of inequ
eco benefits of inequality list
- encourages LF ^edu and skill lvls
* as long as low income recipients can afford to pay for edu & training, incoem inequality encourages increase in qualift LF - ineq encourages LF to work longer & harder
* potential earn higher incomes incentive to work longer hrs/overtime –> eco growth
* workers only willing give up lesiure & work longer hrs if think extra income more valuable than leisure time.
* if ^output rewarded via higher pay, improves labour productivity - inequ makes LF more mobile
* higher incomes encourage labout move most needed, efficient allocation resources, higher eco growth
in theory, greater income inequ encourages increasd savings cause more higher income earners (MPS) –> reduce aus reliance on foreign capital to provide domestic funds for investment
eco costs inequality
- reduce overall utility
* higher incomes gain less utility from ^ income than ppl lower incomes
* diminishing marginal utility (more good consumed provide progressively less utility to consumer (extra $1 income worth more for lower income)
* more equitable distribution income increase total utility (create greater overall lvl satisfaction in society)
BUT DIFFICULT to measure relative utilities accurately
- inequ can reduce eco growth
* low income earners spend higher prop income –> growth
* uneqal socieites undermine edu opps for children from poor bg –> less productive, skilled workforce - inequ reduce C&I
* low income earners spend higher prop income since basic essentials takes higher prop income
* higher inequality –> less income into consumption –> lower eco activity, employment, linvestment, LS UNFINISHED.
