UNIT 3.2 – OCCUPATIONS AND EARNINGS

Q1. WHAT FACTORS DETERMINES OCCUPATION

Q2. WHAT DETERMINES OUR LEVEL OF EARNINGS

UNIT 3.2 – OCCUPATIONS AND EARNINGSChoosing an Occupation

People work for a salary as a means of survival.

Non-Wage Reasons

Fringe Benefit

HolidayEntitlement

Promotion Prospects

Upgrading/Training

Hours of work

Work Satisfaction

Flexible Working Arrangement

Job Security

Working Enviroment

Interesting orBoring

Qualification Required

Distance from home

WAGE REASONS

UNIT 3.2 – OCCUPATIONS AND EARNINGS

All the wage and non wage factors that affect the attractiveness of a particular job or occupation are called its net advantages. A person will compare and select jobs or occupations by comparing their advantages and disadvantages.

When people have to choose, as they cannot be working at 2 jobs simultaneously, then opportunity cost arises. The opportunity cost of working more hours is less leisure hours.

UNIT 3.2 – OCCUPATIONS AND EARNINGSOccupational Specialization

Benefits of Specailaization

- allows individuals to make the best use of their skills and abilities.- Can improve their skills further by doing something repetitively.- Skilled employees are more productive and are in greater demand.

Disadvantage of Specilzation for an individual

- they become dependent on others to produce their need (FOPs) as they cannot produced it by themselves.

- Doing the same job for a long time can be boring.- Skills and become redundant and outdated in line with eonomic

growth and globalization.

UNIT 3.2 – OCCUPATIONS AND EARNINGSThe labour Market1. The demand for labour is derived. Where there is an increase demand for goods and services, then you will see and increase in demand for labour.

2. So long as the cost of 1 extra labour is lower than the revenue gained from using 1 more labour, the producer will continue to employ more labour until the additional cost = the additional revenue.

3. Producers use labour . So the demand for labour is from producers.

4. Consumers provide labour - So the supply of labour comes from consumers.

(This is the opposite of your normal demand and supply where the demand curve represents consumers and supply curve represents producers)

UNIT 3.2 – OCCUPATIONS AND EARNINGSThe labour Market

Wage Rate

Units of Labour/hour

S

D

1. As wages decrease, the demand for labour by the firms will increase. (see demand curve).

2. As wages decrease, the supply of labour by the

consumers will decrease. (see demand curve).

However, the supply curve is not continuously upward slop-ing. It is in fact, backward bend-ing as wages increase.

The labour Market

Wage Rate

Units of Labour/hour

S

D

1. As wages increase, labour would work less hours. With higher wages, they could work less hours and still make the same total salary as one who is paid lower but work more hours.

2. With the time saved, they can have more recreation.

W0W0

W1

10hrs 20hrs

The Backward Bending Supply curve.

UNIT 3.2 – OCCUPATIONS AND EARNINGSWhat Determines Market Equilibrium Wage Rate?

Ans: Market demand and supply for labour.The labour Market

Wage Rate

Units of Labour/hour

S

D

W0

E

UNIT 3.2 – OCCUPATIONS AND EARNINGSWhy firms change their demand for labour

1.Changes in consumer demand for goods and services.

2.Changes in the productivity of labour. (higher productivity means less labour is required)

3.Changes in the price and productivity of capital.(capital vs labour intensive production, depends on which is cheaper and more productive)

4.Changes in non-wage employment costs.(eg. CPF, unem-ployment insurance)

UNIT 3.2 – OCCUPATIONS AND EARNINGS

Change is Labour Supply is due to the following:

1.Changes in the net advantages of an occupa-tion. (eg. Number off days, time off for children/parent care)

2.Changes in the provision and quality of educa-tion and training. 3.Demographic changes.(eg. Detriot City)

UNIT 3.2 – OCCUPATIONS AND EARNINGS

Why Do Wages Differ For Different Occupation?

1. Different ability and qualification.

2. Difficult with difficult working conditions.

3. Jobs satisfaction. (Certain jobs are more satisfying than others and as such there is a large pool of supply of labour which causes the wage for them to be lower)

4. Lack of information about jobs.

5. Labour immobility – needing to pay more to motivate labour to travel to places further away where job is more readily available.

UNIT 3.2 – OCCUPATIONS AND EARNINGS

Why is it that in a company, not everyone is paid the same wages?

1. Regional differences in labour demand and supply.

2. Length of service.

3. Representation by unions (collective bargaining of wages and work condi-tion).

4. The availability of other fringe benefits that are non monetary – (eg. Longer holidays, medical coverage, etc)

5. Discrimination – Paying lower wages for reasons not related to skills or pro-ductivity and could be based upon race, religion, gender etc)

UNIT 3.2 – OCCUPATIONS AND EARNINGSKnowing that labour can be exploited by powerful business interests or badly affected by poorly performing economy, the government therefore intervenes:

1. To protect the rights of employees and employers.

2. To outlaw and regulate restrictive practices that may be used by unions (eg. US teachers Union) and major employers (like Apple in china).

3. Raise the wages of the lowest paid workers.

4. To reduce unemployment in the country.

5. To outlaw discriminatory practices.

UNIT 3.2 – OCCUPATIONS AND EARNINGS

UNIONS