18.

1: Factors that influence an individual choice of occupation

Three main types of factors:

●​ Wage Factors (monetary/pecuniary factors)
●​ Non-wage factors (non-monetary/non-pecuniary factors)
●​ Limiting Factors

Wage Factors: the pay on offer

●​ Earnings: the total pay received by a worker
○​ 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
○​ Overtime pay
○​ Bonuses
○​ Commission

1.​ Wages (pay/salaries)

a.​ The greater the wage rate on offer, the more people want the job
b.​ Determinants for Wage Distribution
i.​ Standard Hours: Paid based on a standard rate of hours
ii.​ Time Rate System: May vary according to the number of
hours worked
Advantages and Disadvantages

iii.​ Piece Rate System: Paid workers based on output

1.​ Only plausible where output can easily be
standardized and measured
(agriculture/manufacturing, not services)
Advantages and Disadvantages
2.​ Overtime Pay: paid to workers who work in excess of the standard
working week
a.​ Usually paid at a higher rate
b.​ Attract workers, like with children who are need of money (regular
overtime)
Advantages and Disadvantages

3.​ Bonuses: Extra payment made to workers who EXCEED standards

a.​ Examples:
i.​ Finish a project before time
ii.​ Secure a profitable contract
iii.​ Produce above the standard
iv.​ Contribute to higher profits
b.​ Balancing Incentives with Fairness

c.​ Attract worker who have confidence in their ability and motivation
to challenge and work (ex, merchant banking)

4.​ Commission
a.​ Often paid to people in the sales factor
b.​ Receive a proportion of the value of the sales they make
c.​ Commission + standard wage = total payment
Non - Wage Factors: people don’t always choose the highest paying job
1.​ Job satisfaction
2.​ Type of Work
3.​ Working Conditions
4.​ Working Hours

5.​ Holidays
6.​ Pensions
7.​ Fringe Benefits

8.​ Job Security

9.​ Career Prospects
10.​ Size of Firm
11.​ Location of Firm

1.​ Job satisfaction

a.​ Ex: Nurses and Teachers
b.​ Could earn a lot more in other professions. However, there is a
high degree of job satisfaction in teaching people and healing the/
c.​ There are jobs that are well paid and job satisfaction (interesting,
challenging, self-fulfilling)
i.​ TV presenters, footballers, brain surgeon

2.​ Type of Work

a.​ Preference for non-manual work over manual work
i.​ Less physically tiring and more mentally stimulating
ii.​ Perceived to be of higher status
iii.​ Generally have higher paid
b.​ Some may prefer dangerous activities, like bomb disposal and
deep sea diving, but most like a safer environment

3.​ Working Conditions

a.​ Breaks
b.​ Friendly Colleagues
c.​ Pleasant surroundings
4.​ Working Hours
a.​ Variance in NUMBER of working hours and TIMING of hours
i.​ EX: managers and senior officials work longer than shop
workers
b.​ Number
i.​ Some workers may work part-time or flexible hours
1.​ Benefits Employers: Can adjust labor according to
demand
2.​ Benefits Workers: Ex, parents who are doing term timing
c.​ Timings
i.​ Nurses, plumbers, and catering staff may work unsociable
workers

5.​ Holidays
a.​ Countries often have a minimum number of holidays entitled for
full-time workers
b.​ Holiday length still varies by occupation
c.​ Examples, teacher have long holidays, which is a benefit. For parents,
example, holidays help them spend time with their children

6.​ Pensions (support after retirement)

a.​ People are living longer = pension becomes an important factor

b.​ Varies greatly by occupations: Ex

c.​ Usually, public sector workers receive better/generous pension benefits
than private sector

7.​ Fringe Benefits

a.​ Extra benefits provided to worker by their employers
i.​ Free/subsidized meals
ii.​ Health schemes
iii.​ Social/leisure facilities

8.​ Job Security

a.​ Job security means that workers are unlikely to be made
redundant/dismissed, meaning they will have stable income/livelihood.
This attracts workers.
b.​ Job Security is more likely in occupations with:
9.​ Career Prospects
a.​ If there is a possibility of getting promoted to a well-paid and interesting
post, people will be willing to accept a lower-paid job at first.
i.​ Ex. Work long hours, not paid well (accountants, barristers,
doctors)
b.​ Experience, Pass examinations

10.​ Size of the Firm

a.​ Large Firm - (ex. Civil service)
i.​ pay better
ii.​ Greater career prospects
iii.​ Job security
iv.​ Fringe benefits
b.​ Smaller Firms
i.​ Friendly and better pay relations

11.​ Location
a.​ Closer to home, less time and money spent on commute
Limiting Factors
●​ Wants: well paid, high job satisfaction, good career benefits, job
security, fringe benefits, and convenient locations
●​ Limited
○​ Skills
○​ Qualification
○​ Experience
○​ Location
●​ Opportunity Cost: Workers must give up one occupation to choose
another.
○​ Ex, they will give up a well-paying job for a job with high job
satisfaction
18.2: Wage Determination and the reasons for differences in
earning

1.​Key: Demand and supply of labour

2.​Relative Bargaining Power of Employees
3.​Government Policy
4.​Public Opinion
5.​Discrimination

1.​Demand and Supply

a.​ When Demand is high (relative to supply), but supply is low, pay is
High
b.​ When supply is relatively higher than demand, pay is low
i.​ Ex. Doctors
1.​ High Demand: Health is essential
2.​ Low Supply: Not many have qualification, and less are
willing and able to undertake long period of
challenging training
ii.​ Ex. Cleaner: High supply- little to no qualifications, skills,
and minimum training

c.​ Unskilled vs Skilled

i.​ Skilled workers are generally paid more than unskilled
workers. They are high in demand and low in supply
(generally).
ii.​ Demand for workers are influenced by two factors:

d.​ Dangerous Jobs

i.​ Dangerous jobs often pay well because less people are
willing to them
ii.​ Hence supply is less
iii.​ Hence employers pay them at a higher rate (ex.
steeplejacks)
e.​ Agriculture and Manufacturing Industries
i.​ In many countries, there is a surplus of agricultural workers,
leading to lower wages for agricultural workers
ii.​ Demand and price of products in manufacturing sector
increase at a greater rate than that in the primary sector
1.​ Demand for manufacturing workers is relatively higher
than agricultural worker sectors

f.​ Private and Public Sectors

i.​ D/S vary in country
ii.​ Some have expanded public sector while some have
contracting
iii.​ People prefer to work in public sector due to
1.​ Better job security
2.​ Holidays
3.​ Pensions
2.​ Relative Bargaining power of Employees and Workers
a.​ Wages are likely to be higher in occupations where workers have
strong bargaining power relative to their employees
b.​ Trade unions, togetherness, replacability
c.​ Public Sector vs Private Sector
i.​ Public Sector: More likely to be part of a trade
union/professional organization
1.​ Governments are more likely to negotiation with trade
unions than private sector employers
2.​ Easier for PuS workers to get together and operate as
one bargaining body
ii.​ Government Labor Market Policies
1.​ Public Sector more likely to be affected, private sector
find workarounds
a.​ Good: NMW
b.​ Bad: Policies reducing wage rises to reduce
inflationary pressure

3.​ Goverment Policies

a.​ Government Influence on Wages:
●​ Public Sector: Directly sets wages for workers it employs.
●​ Private Sector: Influences wages indirectly through policies
that promote economic growth, increasing demand for labor
b.​ Impact on Specific Occupations:
i.​ Policies or laws can increase demand for certain
professions, e.g., requiring periodic driving tests could raise
demand and wages for driving instructors.

c.​ Labour Market Policies: National Minimum Wage (NMW):

i.​ A government-mandated wage floor that makes it illegal to
pay below a certain hourly rate.
ii.​ Aims:
●​ Raise pay for low-income workers.
●​ Reduce poverty.
iii.​ Conditions for Impact:
●​ NMW must be set above the market equilibrium wage
to affect wages.

d.​ Economic Implications of NMW:

●​ Unemployment Risk:
○​ A higher wage (W1) than equilibrium (W) may lead to
unemployment as labor supply (QS) exceeds demand
(QD).
●​ Employment Growth Possibility:
○​ Higher wages can boost worker motivation and
productivity.
○​ Increased demand for goods (due to higher wages)
can lead to higher labor demand.
○​ This may raise both wage rates and employment
(equilibrium wage aligns with NMW).
●​ Side Effects
○​ Provoke some worker, who were previously being paid
just above the NMW, to raise wages, to maintain wage
differential
4.​Public Opinion
a.​ Job Rewards:
●​ Jobs requiring extensive study and training are generally
seen as deserving higher rewards.
●​ Perception varies by country:
○​ Engineers: Highly regarded in Scandinavia but less
so in the UK.
○​ Doctors and Nurses: Typically held in high esteem
globally.

b.​ Wage Claims:

●​ Wage Claims by Workers:
○​ Workers compare their wages to similar occupations.
○​ Example: Firefighters may seek raises equivalent to
police officers if the latter receive a pay hike.
●​ League Table Effect:
○​ There is an informal hierarchy of wage rates, with
workers striving to maintain relative positions.
○​ Example: Hotel porters would not expect wages
comparable to veterinary doctors.

c.​ Public Sector Employee Wages:

●​ Public opinion can pressure governments to adjust wages to
maintain/gain support:
○​ Example: If the public believes nurses are underpaid,
governments may raise their pay

d.​ Gender Pay Disparities:

●​ Nursing has a high proportion of women workers.
●​ Societal Attitudes: In some countries, societal attitudes
against working women lead to:
○​ Fewer job opportunities for women.
○​ Lower wages compared to male counterparts.
5. Discrimination
●​ Discrimination occurs when a group of workers is treated unfavourably
in terms of:
○​ employment,
○​ wage rate
○​ he training received and/or promotional opportunities.
○​ Ex: Some employers are reluctant to hire female workers, so their
demand and pay is less
●​ Governments are attempting to make discrimination illegal. However,
women still get paid less on average than men.
○​ Are still discriminated against
○​ Work less hours
○​ Have fewer qualifications (but that is changing as women are
going to universities)
○​ Are heavily concentrated in low-paid jobs
○​ Don’t belong to trade unions/professional organizations
18.3: Why Earnings of Occupations Over-time
1.​KEY: Changes in Demand/supply of labour
2.​Changes in Stages of production
3.​Changes in Bargaining power
4.​Changes in government policies
5.​Changes in public opinion

KEY: Changes in Demand/supply of labour

1.​ Changes in the Demand for Labour:
●​ Effect of Increased Demand:
○​ Higher earnings due to:
■​ Increased wage rates.
■​ Higher bonuses.
■​ More (and better-paid) overtime opportunities.
○​ Example: Wage rates for bricklayers rising with increased
demand
●​ Causes of Increased Labour Demand:
○​ Increased Product Demand: Labour demand is derived from
product demand.
○​ Higher Labour Productivity: Makes hiring more workers more
cost-effective.
○​ Rising Capital Prices: Labour can substitute capital in some
cases.
●​ Examples:
○​ Pilots: Rising wages due to increased demand from air travel.
○​ Agricultural Workers: Falling wages as demand declines with
capital replacing labor.

2.​ Changes in the Supply of Labour:

●​ Effect of Decreased Supply:
1.​ Higher wages due to reduced labor availability.
●​ Causes of Decreased Labour Supply:
1.​ Fall in Labour Force: General reduction in the number of
workers.
2.​ Increased Qualifications or Training Requirements: Reduces
eligible workers.
3.​ Reduced Non-Wage Benefits: Poor working conditions or risks
deter workers.
4.​ Increased non-wage.wage benefits in other jobs: Higher
wages or benefits elsewhere attract workers away.
●​ Example: Wage increases for accountants due to higher qualifications
2. Changes in the Stages of Production
Sector Definitions:
●​ Primary Sector: Agriculture, fishing, forestry, mining, and natural
resource extraction.
●​ Secondary Sector: Manufacturing and construction industries.
●​ Tertiary Sector: Service industries.

1. Earnings Across Sectors:

●​ Primary Sector:
○​ Workers generally earn less due to:
■​ Lower skill and qualification requirements.
■​ Declining demand as economies develop.
●​ Secondary Sector:
○​ Initial increase in demand as economies industrialize.
●​ Tertiary Sector:
○​ Some of the highest-paid jobs due to:
■​ Increased demand for services with rising incomes.
■​ High qualifications required for many roles (e.g., judges,
surgeons).

2. Variations Within Sectors:

●​ High-paid roles in the Primary Sector: Example: Engineers in the oil
industry.
●​ Low-paid roles in the Tertiary Sector: Example: Shop assistants.

3. Key Insight:
●​ Economic development shifts demand for labor from the primary to the
secondary and then to the tertiary sector.

3. Changes in bargaining power

A change in unions’ bargaining power or willingness to take industrial action
can affect earnings.
●​ Government removes a ban on agricultural workers forming unions
collectively, then 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.​ Expansion/Banning
a.​ Ex: expansion of public sector increases wages for public sector
employees
b.​ Ex: reducing road building reduced wages for road workers
2.​ NMW
a.​ Raise NMW increases pay for lower paid workers
3.​ Education
a.​ Improved education may lead to more workers, increases supply
and reducing wages. OR,
i.​ Improved education
ii.​ More skilled workers (increases demand more than supply)
iii.​ Reduce costs of production + increase international
competitiveness
iv.​ Demand for products of the country’s firm increases
v.​ Attracts MNC

4.​ Immigration
a.​ Making it easier for foreign people to work in the country
i.​ Increases supply of labour
ii.​ May Hold down wage rises
b.​ Ex: Shortage of ICT workers, increase immigration, more of
worker come

5.​ Anti-discrimination
a.​ Anti-discrimination policies for disadvantaged groups:
i.​ Increase wages
ii.​ Increase career prospects
b.​ Work by changing public opinion
c.​ EX: attitude towards woman working has become more favorable
+ rise in educational performance = services more valuable = rise
in wages
6.​ Advances in Technology
a.​ New technologies may reduce worker demand by taking over their
jobs, reducing wages (banking)
b.​ New technologies (eg, online services) may create/expand new
sectors, and increase demand (for delivery drivers)
5. Changes In Public Opinion

6. Changes In Earning Over time

18.4: The extent to which earnings change

Magnitude of Wage Changes:

●​ Influenced by:
○​ Size of the change in demand or supply of labor.
○​ Elasticity of demand and supply of labor.
●​ Example:
○​ Inelastic demand and supply result in larger wage changes for the
same demand shift (Fig. 18.7a).
○​ Elastic demand and supply result in smaller wage changes for the
same demand shift (Fig. 18.7b).

Elasticity of Demand for Labour:

●​ Definition: Responsiveness of demand for labor to wage changes.
●​ Determinants:
1.​ Proportion of Labour Costs: High proportion = elastic demand.
2.​ Ease of Substitution by Capital: Easy substitution = elastic
demand.
3.​ Elasticity of Product Demand: Elastic product demand = elastic
labor demand.
4.​ Time Period: Labor demand is more elastic in the long
Elasticity of Supply of Labour:
●​ Definition: Responsiveness of labor supply to wage changes.
●​ Determinants:
1.​ Qualifications and Skills Required:
■​ High qualifications = inelastic supply (e.g., brain surgeons).
2.​ Length of Training Period:
■​ Longer training = inelastic supply (due to delays and
reduced willingness).
3.​ Level of Employment:
■​ High employment levels = inelastic supply (requires
significant wage increases to attract workers).
4.​ Mobility of Labour:
■​ Higher mobility = elastic supply.
5.​ Degree of Vocation:
■​ Strong job attachment = inelastic supply during wage
decreases.
6.​ Time Period:
■​ Supply becomes more elastic over time (as workers adapt
to wage changes or gain necessary qualifications).
18.5: Specialization and Division of Labour

1. Specialization:
●​ Definition: Concentrating on particular products or tasks rather than a wide
range.
○​ Example: A doctor focusing on heart problems instead of treating all
illnesses.
●​ Key Advantage: Promotes efficiency and expertise in specific areas.

2. Division of Labour:
●​ Definition: A form of specialisation where workers focus on specific tasks
within the production process.
●​ Advantages:
1.​ Higher Efficiency:
■​ Workers become skilled at a specific task through repetition
("practice makes perfect").
2.​ Faster Training:
■​ Training is simpler as it focuses on specific tasks rather than a
full range of skills.
3.​ Time-Saving:
■​ Less time wasted transitioning between tasks.
4.​ Machinery Integration:
■​ Easier to design machinery tailored for specific tasks.
●​ Disadvantages:
1.​ Boredom:
■​ Repetitive work can demotivate workers, leading to mistakes or
absenteeism.
2.​ Job Inflexibility:
■​ Specialized workers may struggle to adapt to new roles or cover
for absent colleagues.
3.​ Higher Costs:
■​ Specialized workers in high demand may command higher
wages.
3. Impact on Workers:
●​ Advantages:
○​ Greater expertise can lead to higher wages.
○​ Pursues specific interests (e.g., a doctor specializing in neuroscience).
○​ Reduces pressure in less demanding jobs.
●​ Disadvantages:
○​ Risk of job insecurity if demand for specialized skills falls (e.g., coal
miners facing industry decline).
○​ Boredom may hinder personal growth and fail to utilize all talents.

4. Economic Implications:
●​ Benefits:
○​ Lower costs of production.
○​ Higher quality of products.
○​ Enhanced ability to export goods and services.
●​ Risks:
○​ If costs increase or product quality decreases, economic benefits may
be undermined.

Key Insight:
●​ While specialisation and division of labour can enhance productivity and
economic output, they require careful management to mitigate risks like
worker boredom, skill obsolescence, and economic inflexibility.