<3.3 WORKERS> 

• The SUPPLY OF LABOUR depends on various factors related to the type of occupation/industry such as: 

  • • • The LEVEL OF SKILLS and QUALIFICATIONS required. Clearly the number of people who possess skills that take a long time (or even a lot of money) to attain will be in short supply, these are referred to as 'SKILLED LABOUR'. Whereas the supply of 'UNSKILLED LABOUR' will be in greater supply. 

      • The DANGER LEVELS required. Clearly dangerous occupations will have a limited supply of people willing to supply their labour compared to more safer professions.

      • The LEVEL OF JOB SECURITY is also an important factor, as some professions, particularly PUBLIC SECTOR jobs (Gov't jobs), offer better 

• The most obvious governmnet policy to impact wages would be when they set a NATIONAL MINIMUM WAGE which as the name suggests LEGALLY SETS the LOWEST WAGE THAT CAN BE OFFERED BY AN EMPLOYER TO THEIR EMPLOYEES. 

• In many countries this is the wage earned by low-skilled workers eg. fast food workers as such changes don't impact all industries equally.

• "Yes!, if NMW rises, it causes the firm's costs of production to rise and we know that this should result in less output and if this is the case then the 'derived' demand for workers will also be less!"

• "Yes!, higher costs will likely lead to higher prices and less competitiveness leading to lower demand for the product and as a result workers will have to be layed off."

• "Yes!, with the price of technology and AI falling so rapidly, higher labour costs will mean it may be more affordable to replace workers with automation, which will increase unemployment."

• "Yes!, If NMW rises above the equilibrium wage, then the price of labour rises so according to the law of demand the quantity demanded of labour falls while according to the law of supply the quantity supplied of labour rises, but as the NMW is fixed above equilibrium it will cause a huge surplus of labour at the NMW, making the unemployment problem worse!"

• "Yes!, If NMW rises then workers who would accept a lower wage will seek illegal black market work (sweatshops), which have no regulations and require expensive policing resources."

• "It's an upward wage spiral, if the NMW rises then other workers who previously earned more than the NMW will also like an increase in order to maintain the difference".

• Read the GREEN statement ABOVE and use it to create a LABOUR MARKET DIAGRAM showing how a NMW above equilibrium creates UNEMPLOYMENT.

• "No!, If the NMW rises, workers will be much more motivated and productive meaning average costs will actually fall."

• "No!, If the the NMW rises, it puts more money in the hands of low-wage workers, who are more likely to spend it (rather than save), thus boosting demand for goods and services which will remove this surplus of labour that originally occurred."

• "No!, If the the NMW rises it can help ensure that workers earn enough to cover basic needs, reducing poverty and narrowing the gap between the rich and the poor. 

• "No!, If the the NMW rises then workers feel fairly compensated, they are more likely to be satisfied and stay in their jobs, reducing turnover costs for businesses. 

• "No!, If the the NMW rises, low-income workers may be able to reduce their reliance on public assistance programs, saving taxpayers money. 

• "No!, If the the NMW rises workers earn more, they pay more taxes, which can help offset any potential costs associated with a minimum wage increase.  

• Read the PINK statement ABOVE and use it to create a LABOUR MARKET DIAGRAM showing how a NMW above equilibrium initially creates UNEMPLOYMENT but can DEMAND FOR LABOUR and reduce the unemployment surplus. 

Discrimination occurs when a group of workers is treated unfavourably in terms of employment, the wage rate, the training received and/or promotional opportunities. For example, some employers may be reluctant to have female workers. The lower demand will result in lower pay, as shown in Figure 18.4. Increasingly, governments are making such discrimination illegal. Nevertheless, throughout the world, women are (on average) still paid less than men. One reason for this is that women tend to work for fewer hours than men. Even when hourly wage rates are considered, however, women still get paid less than men. There are a number of reasons for this: 

• women tend to be less well qualified than men, but this is changing in a number of countries, with more women now going to university than men

• they tend to be more heavily concentrated in low-paid occupations

• they are less likely to belong to trade unions and professional organisations

• they are still discriminated against.

• As an economy develops its PRIMARY SECTOR (Which includes farming, mining etc) often SHRINKS whilst both its SECONDARY (Manufacturing-based) and TERTIARY SECTORS (Service-based) GROW, which clearly impacts both the professions and wage rates of workers. We can see below how employment in each sector has changed in both Japan and the United States, and we can clearly see the same pattern as described above. So how has this impacted wages?

• The pay of public sector workers is likely to rise if the government decides to expand the public sector. A government decision to reduce road building, in contrast, may reduce the wages of those working for private sector road construction firms. Among the other ways a governments can change wage rates are:

• • Raising the national minimum wage will increase the pay of low-paid workers.

• • Despite the rise in supply, improved education may actually raise the wages of skilled workers, as it may increase their demand more than the supply. This is because employing more skilled workers should reduce costs of production and increase international competitiveness. If this is the case, demand for products produced by the country’s firms should increase and more multinational companies (MNCs) may be attracted to set up their franchises in the country.

• • Government policies on immigration can also affect wages. Making it easier for foreign people to live and work in the country should increase the supply of labour. If a country is short of, for example, information and communication technology (ICT) workers, giving more permits to foreign workers should increase the supply of such workers and may hold down wage rises too.

• • The introduction of government anti-discrimination laws may help to increase the career prospects and wages of disadvantaged groups. Such legislation works, in part, by changing public opinion. In many countries attitudes to working women have become more favourable, and the capabilities and services of female workers are being valued more. This, combined with a rise in the educational performance of women, has raised women’s wages.

• • Advances in technology can alter wage rates. In some cases, it can put downward pressure on wage rates by reducing demand for workers. For example, new technology in the banking industry has reduced the number of banking staff in a number of countries. In other cases, however, new technology can increase wages. For example, the development of online shopping in recent years has increased demand for the services of delivery drivers.