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Workers | O Level Economics 2281 & IGCSE Economics 0455 | Detailed Free Notes To Score An A Star (A*)

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3.3.1 Factors Affecting an Individual’s Choice of Occupation

A. Wage Factors
  • Basic Pay (Wage/Salary): Higher wage generally attracts more workers.
  • Overtime Pay: Payment for extra hours beyond normal work.
  • Bonuses: Extra income based on performance or company profits.
  • Commission: Percentage of sales earned, common in retail or sales jobs.
B. Non-Wage Factors
  • Working Conditions: Safety, comfort, working hours.
  • Job Security: Stability and risk of unemployment.
  • Fringe Benefits: Healthcare, pensions, free meals, company car.
  • Career Prospects: Promotion opportunities, skill development.
  • Location: Distance from home, transport costs.
  • Job Satisfaction: Interest, personal fulfilment, purpose.
  • Company Reputation: Employer branding and work culture.

3.3.2 Wage Determination

A. Demand and Supply in Labour Market
  • Demand for Labour:
    • Derived demand (from demand for goods/services).
    • Influenced by productivity, profitability, and cost of labour.
    • Higher wage = lower quantity demanded (downward-sloping demand curve).
  • Supply of Labour:
    • Affected by working population, education, skills, mobility.
    • Higher wage = more people willing to work (upward-sloping supply curve).
B. Equilibrium Wage
  • Determined by intersection of labour demand and supply curves.
  • Shows wage rate and number of workers employed.
C. Factors Influencing Wage Level
  • Bargaining Power of Unions: Stronger unions may negotiate higher wages.
  • Government Policy:
    • Minimum wage: Legal wage floor can push wage above equilibrium.
    • Employment laws and regulations.
  • Discrimination: Gender, race, age biases can distort wage fairness.
  • Market Conditions: Recession or boom influences wage setting.

3.3.3 Reasons for Differences in Earnings

A. Skill Level
  • Skilled Workers (e.g., surgeons, engineers):
    • Scarce, expensive training → high wages.
  • Unskilled Workers (e.g., cleaners, loaders):
    • Abundant supply → lower wages.
B. Sector of Employment
  • Primary Sector (e.g., farming, mining):
    • Often lower wages, harsh conditions.
  • Secondary Sector (e.g., manufacturing):
    • Varies by country, higher than primary.
  • Tertiary Sector (e.g., services, finance):
    • High demand → often higher wages.
C. Gender Differences
  • Women often earn less due to:
    • Discrimination,
    • Career breaks (e.g., maternity),
    • Part-time/flexible roles.
D. Private vs Public Sector
  • Private Sector:
    • Higher pay in competitive industries (banking, IT).
    • Profit-motivated.
  • Public Sector:
    • Often more secure, but fixed salary scales.
E. Demand and Supply Imbalances
  • Shortage of workers → wages rise.
  • Oversupply of workers → wages fall.
F. Other Influences
  • Experience and Age
  • Location (urban vs rural)
  • Job Risk (dangerous work = higher pay)

3.3.4 Division of Labour / Specialisation

Definition
  • Division of Labour: Splitting production into small tasks, with each worker specializing in one task.
  • Specialisation: Focusing on one area of work to gain efficiency.
Advantages
For Workers For Firms For Economy
Improved skills Increased productivity More efficient use of resources
Higher earning potential Faster production Increased output & exports
Job satisfaction (if skilled) Reduced training costs Lower unit costs
Disadvantages
For Workers For Firms For Economy
Repetitive tasks → boredom Overdependence on key workers Structural unemployment
Limited skill set Vulnerability to absenteeism Low flexibility in labor market
Higher unemployment risk Lack of innovation in routine jobs Less adaptable to economic changes

Labour Market Diagrams

  • Wage Determination:
    • X-axis: Quantity of labour
    • Y-axis: Wage rate
    • Downward-sloping demand curve (D)
    • Upward-sloping supply curve (S)
    • Intersection = Equilibrium wage (W*) and employment level (Q*)
  • Impact of Minimum Wage:
    • Horizontal line above equilibrium wage.
    • Leads to excess supply (unemployment) in competitive markets.

Exam Tip

  • Use diagrams to show wage determination, minimum wage effects.
  • Be precise with causes of wage differences—link to supply/demand and real-world examples.
  • Distinguish clearly between wage and non-wage factors.
  • Discuss division of labour from multiple perspectives (worker, firm, economy).
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