Chapter 18

Workers
 Learning objectives
By the end of this chapter you will be able to:
Analyse the wage and non-wage factors that influence an
individual’s choice of occupation
Analyse how wages are determined
Discuss the influences on wage determination
Draw demand and supply diagrams to analyse labour
markets
Discuss the reasons for differences in earnings
Discuss the advantages and disadvantages of division of
labour, specialisation for workers, firms and the economy
 18.1 Factors that influence an individual’s
choice of occupation
There is a wide range of factors that may influence
a person’s choice of jobs.
• These can be divided into
• wage factors (also called monetary or pecuniary
factors).
non-wage factors (also referred to as non-monetary
or non-pecuniary factors) and limiting factors
 Wage factors
An important influence on what jobs a person
decides to do, is the pay on offer. The total pay
a person receives is known as his earnings. In
addition to the basic wage, earnings may also
include overtime pay, bonuses and
commission.
 Wages
Wages may also be referred to as pay or
salaries. Generally, the higher the wage rate
on offer, the more a person would want to do
the job. Higher pay is one reason why working
for example as a doctor is a more attractive
prospect than working as a cleaner.
 Overtime pay
Overtime pay may be paid to the workers who work in excess
of the standard working week. It is usually paid at a higher rate.
Overtime can benefit both employees and employers. Workers
with young families, for example, are often anxious to increase
their pay and may be attracted by jobs that offer regular
overtime. It enables employers to respond to higher demand
without taking on new workers, until they are sure that the
higher demand will Last. It is easier, less costly and less
disruptive to reduce overtime than to sack workers if demand
declines .
 Bonus
A bonus is an extra payment. It can be paid to
workers who produce above a standard
amount, finish a project ahead of time, secure a
profitable contract or contribute to higher
profits in some other way. Bonuses can provide
an incentive for workers to produce both a high
and a good quality output or to stay with a firm.
 Commission
• Commission is often paid to the sales people.
It involves them receiving a proportion of the
value of the sales they make Sometimes, this
is in addition to a standard wage and
sometimes it makes up their total payment.
 Answer
1 a $80 000 is one quarter of $320 000. So,
pilots in Brazil were paid $80 000.
B The shortage of pilots in China would be
expected to push up the wages of pilots in
Brazil. This is because some Brazilian pilots
may go to China, creating a shortage in Brazil.
 Non-wage factors
People do not always choose the highest paid
job on offer. They take into account a range of
other factors including job satisfaction, type of
work, working conditions, working hours,
holidays, pensions, fringe benefits, job
security, career prospects, size of firm and
location
 Job Satisfaction
• Nursing and teaching are not particularly well-paid
occupations and a number of those undertaking them can
earn more in other occupations. These jobs, however, can
provide a high degree of job satisfaction. Nurses and teachers
can derive considerable satisfaction from improving peoples
health and educating students. Of course. some jobs provide
both high pay and a high level of job satisfaction. Brain
surgeons. TV presenters and top football players all have
interesting, challenging and well-paid jobs.
 Type of work
• Most people would rather do non-manual than manual
work. This is because it is physically less tiring and
generally offers more mental stimulation. Non-manual
work also tends to be better paid. People also like to do
jobs which enjoy a high status and most of these tend to
be non-manual. For example. university professors tend
to be held in higher regard than stone-masons. Some
people are prepared to undertake dangerous work, for
example deep sea diving and bomb disposal. but most
people prefer to work in a safe environment.
 Working conditions
• Working conditions are an important
determining factor. People like to work in
pleasant surroundings, with friendly
colleagues and enjoying regular breaks.
 Working Hours
Occupations vary in terms of the number of
hours expected from workers and the timing
of those hours. Managers and senior officials
tend to work for longer hours than shop
workers.