D IFFERENCES IN WAGE OUTCOMES

4. W AGE DIFFERENTIALS BETWEEN DIFFERENT OCCUPATIONS Differences in wage rates are dependent on the following: 1. Level of education and skills – in the labour market people are generally rewarded for working in occupations that require a higher level of skill and a longer period of training. 2. Working conditions – people working in conditions that are less appealing than others are more inclined to get paid higher wage rates. 3. Occupational mobility – Where occupational mobility is high the supply of labour to that occupation is always likely to be high. There is less need for employers to raise wages to attract labour. 4. Bargaining power – Wage rates for workers within a particular industry will be dependent upon the relative bargaining power of employees and employers in that industry.

W AGE DIFFERENTIALS IN THE SAME OCCUPATION Wages also differ markedly for workers in the same occupation. This may be due to: 1. The level of experience – more experienced workers are generally considered to be more valuable and are quite often paid more. 2. Geographical labour mobility – higher wages are paid to employees that are willing to work on isolated locations (think about supply and demand). 3. The productivity of labour – under enterprise bargaining, higher wages can be negotiated in exchange for higher productivity. 4. The capacity of the firm to pay – Some firms are more profitable and have a greater capacity to pay higher wages.

Q UESTIONS 1. Define the term real wage. 2. Account for the differences in wages within occupations.