Occupations and Earnings

Question 1

Define

wage rate

Answer 1

The amount paid to an employee per period of time worked or per unit of output produced.

Question 2

List and describe the different ways in which the wage rate for a job can be paid

Answer 2

• Time rate: rate of pay per hour worked
• Piece rate: paid per unit of output produced
• Fixed annual rate or salary: payment is divided into 12 equal monthly payments regardless of hours worked
• Performance-related payments: may be offered to individual employees or teams of workers who are highly productive

Question 3

Describe how a worker’s earnings may change as s/he progresses in life

Answer 3

• Entry: Young employee will receive low earnings due to lack of work skills and experience, can become an apprentice or join a management training scheme to become more skilled
• Skilled workers: the more skilled a worker is, the more opportunities he has for increasing his earnings. Bonuses will be given and higher rate of overtime paid.
• End-of-career employees: if workers keep updating skills, they will continue to have opportunities to increase wages however when they stop this, their demand would fall and income would diminish, finally reaching a stop when retired.

Question 4

How do people choose between different occupations?

Answer 4

People choose between different occupations and employers by comparing their wage and non-wage factors.

All the wage and non-wage factors that affect the attractiveness of a particular job or occupation are called its net advantages.

Question 5

Define non-wage factors, and list examples

Answer 5

Aspects of a job other than the wage rate, such as hours of work or holiday entitlement, which make it attractive.

• hours of work
• holiday entitlement
• promotion prospects
• flexible working arrangements
• qualifications required
• quality of working environment
• how secure the job is
• work satisfication
• fringe benefits
• training oppurtunities

Question 6

Define

fringe benefits

Answer 6

Perks or non-financial rewards for employees, such as free medical insurance or use of a company car, which nevertheless have monetary value.

Question 7

How has the advance of technology caused some people’s jobs to become redundant?

Answer 7

New advanced machines are able to carry out tasks more quickly and efficiently than humans, so labour is replaced with capital equipment. This is known as factor substition.

Question 8

List 3 benefits of specialisation for an individual

Answer 8

• Individuals can make the best use of their skills and abilities
• Skills are improved by frequent repetition
• Skilled employees are more productive and can earn more

Question 9

List 3 disadvantages of specialisation for an individual

Answer 9

• Individuals must rely on others to produce the goods and services they want but cannot produce themselves
• Doing the same job for many years can become boring and stressful
• People can lose their jobs if their skills or occupations become unwanted as consumer demand and/or technology changes

Question 10

Define

labour market

Answer 10

Any set of arrangements that brings together all those people willing and able to supply their labour with organizations that want to hire labour.

Question 11

Define derived demand, and explain why the demand for labour is a derived demand.

Answer 11

When demand for one good or service occurs as a result of demand for another.

The demand for labour by firms is a derived demand because labour is needed to produce goods and services, and so is influenced by consumer demand for those products.

However, firms are only likely to employ additional workers if they add more value than they cost to employ.

Question 12

Define

equilibrium wage rate

Answer 12

The market clearing rate of pay at which the amount of labour demanded by firms will match the amount supplied.

Question 13

Explain the relationship between wage rate per hour and the number of hours worked

Answer 13

Backward bending supply curve

• As wage rate rises, the supply of labour extends
• However, at some point individuals might decide they earn enough and would like to take more leisure time
• At very high wage rates it is possible to have both more wage income and more leisure

Question 14

What factors may cause firms to change their demand for labour?

Answer 14

• Changes in consumer demand for goods and services
• Changes in the productivity of labour
• Changes in the price and productivity of capital
• Changes in non-wage employment costs e.g. pension contributions, health and safety costs

Question 15

What factors may affect the supply of labour?

Answer 15

• Changes in the net advantages of an occupation
• Changes in the provision and quality of education and training available in relevant skills
• Demographic changes - changes in the size and age distribution of the popluation

Question 16

Define

wage differentials

Answer 16

Differences in rates of pay between different occupations, industries, locations and group of workers.

Question 17

What factors explain occupational wage differentials?

Answer 17

• different abilities and qualifications
• ‘dirty’ jobs and unsociable hours (paid more: compensating differentials)
• job satisfication
• lack of information about jobs and wages
• labour mobility
• fringe benefits

Question 18

Define

compensating differentials

Answer 18

Higher rates of pay compared with those for other occupations and required to attract labour to unpleasant, unsociable or dangerous jobs, i.e. the positive wage differential is designed to compensate workers for these unattractive features.

Question 19

Define

labour mobility

Answer 19

The ease with which workers can move between different occupations or jobs.

High labour mobility or willingness to move can help to increase the supply of labour to different occupations in different areas. However, because many people are not very moblie large differences in wag rates for different occupations and even for the same jobs but in different areas can persist.

Question 20

Define

occupational immobility

Answer 20

The inability of workers to move easily between from one occupation to another because they lack the skills required. It is often a feature of structural unemployment.

Question 21

Why do earnings differ between people doing the same job?

Answer 21

• Regional difference in labour demand and supply conditions
• Lenght of service
• Local pay agreements
• Non-monetary rewards differ
• Discrimination

Question 22

Explain the public-private sector pay gap

Answer 22

• Private sector is paid more (in general, not true in all cases)
• Public sector competes with private sector firms to attract workers
• The government is such a big employer it has the power to hold fown the wages
• However, public sector employees have more secure jobs and, in some cases, better pensions

Question 23

Describe and explain the differences between wage rates for skilled and unskilled workers.

Answer 23

• Skilled workers are paid more
• Wage inequality has been increasing between skilled and unskilled workers
• Increasing globalisation of production
• Trade union power has decreased in many developed economies

Question 24

Describe the wage differentials between workes in different industries

Answer 24

• Agricultural workers are paid less (decreased demand due to capital-intensive production)
• Manufacturing and service industry have expanded
• Shortage of supply of labor with specialist skills for many manufacturing sectors
• However, changes in wage differentials may be resisted by trade unions regardless of changing labour market conditions

Question 25

Describe and explain the difference in wages between males and females

Answer 25

• Average earnings of men usually exceed those of women across the world
• Women may work in occupations that have low market wage rates (e.g. teaching, nursing, retailing)
• Women may take career breaks to raise children, and so build up less work experience
• More women work part-time compared to men
• However, the gender pay gap has declined due to:
  
  • more women joining the labour force
  • changes in social attitudes
  • equal pay laws in some countries

Question 26

Why do governments intervene in labour markets?

Answer 26

1. To protect the rights of employees and employers
2. To outlaw and regulate restrictive practices that may be used by powerful trade unions and majoy employers
3. To raise the wages of the lowest-paid workers (minimum wage legislation)
4. To reduce unemployemt
5. To outlaw unfair discrimination

Question 27

Define minimum wage legislation, and list advantages and disadvantages of having a minimum wage.

Answer 27

Laws that determine and set the lowest hourly, daily or monthly wage rate or remuneration that employers may legally pay to their workers in exchange for their labour.

Advantages:

• Powerful employers have no incentive to restrict their demand for labour in order to hold down wages
• Protects low-paid workers from exploitation by powerful employers
• May make workers achieve higher levels of productivity

Disavantages:

• Raises production costs and reduces demand for labour