© The McGraw-Hill Companies, 2002 Different types of labour

© The McGraw-Hill Companies, Hourly earnings in the UK 2000 In both manual and non-manual occupations, men are seen to earn more than women. Does this mean there is discrimination?

© The McGraw-Hill Companies, Sources of differential pay Education and training Job experience Race and gender Trade union membership

© The McGraw-Hill Companies, Human capital The stock of expertise accumulated by a worker It is valued for its income-earning potential in the future A form of investment

© The McGraw-Hill Companies, Age-earnings profiles Age-earnings profiles show how typical earnings vary with age and educational qualifications –education induces a differential –which tends to increase with age. Age Income No formal qualifications A-level or equivalent University degree or equivalent

© The McGraw-Hill Companies, Worker organisations designed to affect pay and working conditions. A closed shop –an agreement that all the firm's workers will be members of a trade union. A trade union may raise wages by restricting labour supply. Trade unions

© The McGraw-Hill Companies, D' Unions in the labour market Employment Wage W0W0 With no union, the industry faces a horizontal labour supply curve at the wage W 0. By restricting labour supply to N 1, the union can increase wage to W 1 N1N1 W1W1 The differential is larger for any given reduction in industry employment, the more inelastic is industry labour demand Given industry demand for labour DD, equilibrium is at E 0. D E0E0 N0N0 D

© The McGraw-Hill Companies, Discrimination? Women and non-whites on average receive lower incomes than white males. Women and non-whites are concentrated in relatively unskilled jobs with fewer opportunities for promotion. This need not reflect blatant sexism or racism by employers...

© The McGraw-Hill Companies, Discrimination? (2) It may reflect –educational or other disadvantages before young workers reach the labour market –a low perceived rate of return for firms on money spent in training such workers. Only if we allow for all these effects can we show discrimination in the labour market.