Wage Differentials and Wage Discrimination A2 Economics

Aims and Objectives Aim: Understand wage differentials in the labour market. Objectives: All: define wage differentials Most: analyse wage differentials in the labour market Some: evaluate whether or not wage differentials can be justified

Starter: Discussion Why do men on average get paid more than women? Why do premiership footballers get paid more than brain surgeons? Why do white people on average get paid more than black people?

Wage Differentials Definition: Differences in wage rates arising between individuals, occupations, industries, firms, and regions. Task: In groups try and think of as many reasons, as to why wage rates differ in an economy.

Why do wages differ? 1 Labour is not homogeneous, therefore have different MRP, therefore different demands, different supplies, and discrimination exists between labour. 2 Labour is not perfectly mobile therefore there are differences in regional pay and between jobs. (Geographical and Occupational Mobility of Labour) 3 Trade unions on the supply side of labour bargain for higher wages for their members 4 Monopsonist employers on the demand side of labour drive down wage rates.

Wage Differentials Between Groups Skilled and Unskilled Workers Skilled workers receive higher wages than unskilled workers because the demand for skilled workers is higher and they are in fewer supply. MRP of skilled workers is higher. More difficult to substitute skilled workers

Wage Differentials Between Groups Wage Rate /MRP Neurosurgeons SN WN Cleaners SC WB DC DN QC Quantity of Labour Employed

Wage Differentials Between Groups: Gender Differences between gender. Men are paid more than women. In part due to more women working part time than men. MRP of women is less than men, therefore firms demand more men. Greater percentage of women work in lower paid jobs. More men attend university Data

Wage Differentials Between Groups: Part Time and Full Time Workers Part time workers tend to receive lower pay than full time. Supply of part time workers is relatively high compared to demand. (MRP is low) Smaller percentage of PT workers are members of trade unions.

Wage Differentials Between Groups: Ethnicity Workers from ethnic minority groups are paid less on average than white people. High % are employed in part time jobs such as restaurants where pay is low. Data

Mr Average of Football Nets £1m Is the pay of top footballers justified? Economic argument for and against. Why shouldn’t a nurse be paid as much? Both have inelastic demands!