Workers

Factors influencing individual’s choice of occupation

Wage rate – the rate at which the employer contracts to pay the employee
The higher the wage rate, the more attractive the job.
Salary – A payment made on a monthly basis, calculated on a fixed annual
rate.
Wage - A payment made on a weekly basis based on the number of hours
worked.
Overtime pay
Money paid to the workers for the extra hours of work.

Bonuses
Bonus is a sum of money added to a person's wages as a reward for
good performance.

Commission
The amount of money that an individual receives based on the level of
sales he or she has made. The sales person is provided a certain
amount of money in addition to his/her standard salary based on the
amount of sales obtained.
 Non-wage factors
Here are some of the non-wage factors which might influence an individual's
choice.
• Job satisfaction – jobs like nursing and teaching are highly satisfying though
may not be well paying
• Type of work – non-manual work may be preferred more than manual
work
• working conditions/environment - pleasant surroundings, with friendly
colleagues and enjoying regular breaks.
• hours of work
• pension
• Fringe benefits
• provision of insurance scheme
• company car
• Job security
• Number of holidays
• Promotion/career prospects
• Travelling distance
• size of company
• social/canteen facilities
Why wages differ?
Reasons for differences in remuneration:
• Demand and supply - Firms producing goods and services which are high in demand usually pay
better remunerations to their workers. Industries where there is a shortage of workers will
usually pay higher remuneration to attract workers.
• Government policies
NMW – national minimum wage floor prescribed by the
government, paying below it is illegal.
• Relative bargaining powers of workers and employers – (Trade
union membership/professional organisations) Trade Union
members might end up negotiating better remunerations then non-
trade union members.
• Public opinion – Public opinion tends to consider that jobs which
involve long periods of study and training should be highly rewarded.
One is through the wage claims made by the workers. Public opinion
can put pressure on a government to revise the wages it pays to the
public sector workers.
• Discrimination – when a group of workers are favoured for
employment, mainly women.
• Skills/training: Jobs requiring higher level of skills and training usually
fetch higher remuneration
• Education/qualifications: Again, jobs requiring higher level of
education/qualification are paid higher remunerations.
• Experience: People with vast experience will get higher remuneration
as compared to a person with lesser experience.
• Level of responsibility: Jobs with greater responsibilities are usually
paid more.
• Geographical area: Jobs located in urban areas are usually carrying
higher remunerations because of higher living costs in cities. People
working in treacherous geographical areas may get extra
remuneration in the form of additional allowances.
Why earnings of occupations change overtime
Earnings of people change over time. For some workers earnings
increase when they get old for others it decreases.
The main reason behind change in earnings is a change in demand or
supply of labour
• Factors increasing demand of labour
• An increased demand for the product. Demand for labour is a derived
demand. The higher the demand for products, the greater is the number of
workers employed.
• A rise in labour productivity. Higher productivity increases the return from
hiring workers.
• A rise in the price of capital. In some occupations, it is possible to substitute
labour for capital in the production process.
Among the factors that could cause a decrease in the supply of workers
are:
• A fall in the labour force. If there are fewer workers, in general, it is likely that
an individual business will find it more difficult to recruit workers.
• A rise in the qualifications or length of training required to do the job. This
will reduce the number of people eligible for the job.
• A reduction in the non-wage benefits of a job. If, for example, the working
hours or risks involved in doing a job increase, fewer people are likely to be
willing to do it.
• A rise in the wage or non-wage benefits in other jobs. Such a change would
encourage some workers to switch from one occupation to another.
3. Changes in bargaining power
4. Changes in government policy
• Raising national minimum wage
• Improved education
• Govt. policy on immigration
• Introduction of anti-discriminatory laws
• Advances in technology
5. Changes in public opinion
 Extent to which earnings change
Elasticity of demand or supply of labour determines how much wages will change.
Factors determining elasticity of demand of
labour
• When proportion of labour costs in total cost is large a small change
in wages will impact a firm’s ability to hire workers. Therefore, the
demand is elastic.
• If labour can be substituted by machinery easily its demand would be
elastic
• if the demand for product is elastic the demand for labour will also
be elastic
• the demand for labour is more elastic in long run as firms may
change their method of production.
Factors determining elasticity of supply of
labour
• Qualification and skills required
• Length of training period
• Level of employment in the country
• Mobility of labour
• The degree of vocation. The more attached the worker is to his job
the supply becomes more inelastic.
• The supply of labour becomes more elastic over time.
Other influencing factors
• A change in union’s bargaining power or willingness to take industrial
action.
• Government expanding or contracting an industry
• Government raising national minimum wage
• Improved education
• Government policies on immigration
• Introduction of anti discrimination laws
• Advances in technology