3.3. Workers
- Syllabus
- 0455–2027–2028
- Topic
- 3.3
- Level
- —
Learning objectives
3.3.1Factors affecting an individual’s choice of occupation• wage and non-wage factors3.3.2Wage determination• influences of the demand for labour and the supply of labour• trade unions and their relative bargaining power• government policy, including national minimum wage (NMW)• drawing and interpretation of diagrams that illustrate the effects of:• changes in demand and supply in the labour market• national minimum wages3.3.3Reasons for differences in wages• reasons for differences:• demand for and supply of labour• relative bargaining strengths• discrimination, e.g. male/female• government policy• how these reasons influence the wages of workers, depending on:• level of skills of workers• economic sector workers operate in: primary/secondary/tertiary• discrimination between workers, e.g. male/female• whether the worker is working in the private sector or public sector3.3.4Mobility of labour• causes of changes in the occupational and geographical mobility of labour• consequences of changes in the occupational and geographical mobility of labour3.3.5Division of labour• definition of division of labour (worker specialisation)• advantages and disadvantages of division of labour
Choose an occupation
An individual chooses an occupation by comparing expected pay with non-wage benefits and costs, while checking whether qualifications, location and personal circumstances make the job available.
| Wage factors | Non-wage factors |
|---|---|
| basic wage or salary | working hours, holidays and flexibility |
| overtime, bonuses and commission | working conditions, safety and location |
| expected future earnings | job security and promotion prospects |
| pension and other financial benefits | status, responsibility and job satisfaction |
| cost of training and income forgone | required qualifications, skills and suitability |
A higher wage raises purchasing power, but it may not compensate for danger, insecurity, long training or inconvenient hours. A lower-paid job can be preferred when it offers stability, safer conditions, better hours or greater satisfaction.
People weigh factors differently and face different constraints. Do not assume the highest-paid occupation is always chosen or that a non-wage factor has no financial consequence—for example, long training has an opportunity cost.
Explain how wages are determined
In a competitive labour market, the equilibrium wage and employment are set where demand for labour equals supply of labour; bargaining and government policy can move the wage away from that market outcome.
| Change | Curve movement | Likely new outcome |
|---|---|---|
| stronger demand for the product or higher worker productivity | labour demand shifts right | wage and employment rise |
| weaker product demand or cheaper substitute capital | labour demand shifts left | wage and employment fall |
| more qualified workers, migration or better transport access | labour supply shifts right | wage falls and employment rises |
| fewer workers with the required skills | labour supply shifts left | wage rises and employment falls |
For a labour-market diagram, put wage rate on the vertical axis and quantity of labour on the horizontal axis. Label demand and supply, mark the original equilibrium, shift only the curve whose determinant changes, and show the new wage and employment. A movement along a curve is not a shift.
A trade union represents workers and bargains collectively over pay and conditions. Its bargaining power is stronger when membership is high, workers are hard to replace, the firm is profitable, labour is important to production and industrial action is credible; it is weaker when unemployment or automation provides substitutes.
A national minimum wage is a legal wage floor. If set above equilibrium, quantity of labour supplied exceeds quantity demanded, so unemployment may rise; firms may substitute machines or reduce output. Higher pay can also improve motivation, productivity and demand. If set at or below equilibrium, it is non-binding and has no direct effect.
A higher wage does not automatically mean more employment. State whether demand or supply shifted, whether bargaining changed the outcome, and whether a minimum wage is binding.
Explain differences in wages
Wages differ when occupations or workers face different labour demand, labour supply, bargaining power, discrimination or government policy. The observed wage is the combined outcome of these forces.
| Source of difference | Mechanism | Application |
|---|---|---|
| demand for labour | derived demand and productivity raise the value of employing a worker | high-value or productive skills can attract higher pay |
| supply of labour | long training, scarce qualifications or difficult conditions restrict supply | highly skilled workers are often harder to replace |
| bargaining strength | unions, professional bodies or individual responsibility strengthen wage claims | organised or senior workers may negotiate more |
| discrimination | equally productive workers are treated differently because of characteristics such as sex | a wage gap can persist without a productivity difference |
| government policy | minimum wages, public-sector pay decisions and anti-discrimination law alter outcomes | policy may compress or create differences |
Skill normally raises productivity and restricts supply, but sector labels alone do not determine pay: primary, secondary and tertiary occupations each contain high- and low-paid work. Public-sector wages may follow government pay scales and budgets; private-sector wages may respond more directly to profit, revenue and firm bargaining.
Explain a gap as a chain: identify the worker or occupation difference → show its effect on demand, supply or bargaining → state the wage direction. Keep discrimination separate from differences caused by productivity, experience or hours.
A higher wage is not proof of greater skill, and an average sector or sex gap does not show the cause by itself. Several mechanisms may operate together.
Understand labour mobility
Occupational mobility is the ability to change jobs or occupations; geographical mobility is the ability to move to another area or country for work.
| Mobility type | What can increase it | What can reduce it |
|---|---|---|
| occupational | education, retraining, transferable skills and information about vacancies | qualification gaps, training cost, age or highly specific skills |
| geographical | better transport, affordable housing, relocation help and fewer migration controls | high housing costs, family ties, language/culture differences and immigration controls |
| Potential benefit | Potential cost |
|---|---|
| vacancies fill faster and labour shortages fall | origin areas may lose skilled or younger workers |
| structural and regional unemployment fall | destination areas may face congestion, housing pressure or public-service costs |
| workers gain choice, wages or conditions | immobile workers may face greater inequality |
| firms respond faster and output/productivity may rise | communities and firms in origin areas may lose demand and labour |
Mobility is ability, not the number of people who actually move. A rise may benefit the whole economy while creating losses for particular workers, regions or countries, so identify both origin and destination effects.
Evaluate division of labour
Division of labour breaks production into separate tasks, with each worker specialising in a particular task rather than producing the whole product.
| Advantage | Why it can occur | Disadvantage | Why it matters |
|---|---|---|---|
| greater skill and speed | repetition builds task-specific expertise | boredom and low motivation | repetitive work may reduce care and productivity |
| less time lost changing tasks | workers and equipment remain focused | narrow skills | workers become less occupationally mobile |
| easier use of specialist machinery | tasks can be standardised and mechanised | dependence between stages | one absence or breakdown can halt production |
| higher productivity and lower unit cost | more output is produced from given inputs | lower craftsmanship or flexibility | standard tasks may reduce variety and adaptability |
| possible higher wages and output | productivity gains can raise revenue | job risk from automation | specialised routine tasks may be easier to replace |
Whether workers benefit depends on how productivity gains are shared through wages, hours and conditions, and whether job variety, security and training improve or worsen. Firms benefit only if coordination savings exceed supervision, breakdown and motivation costs.
Division of labour is worker specialisation within a production process; it is related to, but not identical with, a firm or country specialising in an entire product.