1. REVIEW 3.5
REWARDS FOR LABOUR

2. WAGE- Paid weekly, per hour
SALARY – Paid monthly, amount per year, divided into 12 equal parts
GROSS AND NET INCOME
GROSS- Before deductions
NET- After deductions
Deductions may include: income tax, national insurance, pension contributions and student loan repayments

3. Nominal and Real income:
Nominal income is the income paid to labour unadjusted for the effects of inflation.
Real income is what you can buy with the income. It’s adjusted by inflation.

4. How are wages determined?
Wags are the prices of labour, any price is determined by supply and demand. Therefore wages are determined by the supply of labour and the demand for labour.
(Graph from notes)
The demand for labour is derived demand.
Increase in demand = Higher wage rates. Higher supply for work
Increase in supply = Lower wage rates
Past paper questions:
2011 – Q3b (2)

5. Differences in wage rates
REVIEW 3.6
Differences in wage rates

6. WHY ARE THERE DIFFERENCES?
Differences in the productivity of workers
The elasticity of supply, Inelastic = Higher wages, Elastic = Low wage
Elasticity of demand
Trade Union power
Demand for the product that they are producing
Government pay policy
Compensating
Regional costs of living
Employer discrimination

7. Minimum Wage: FOR MMW goes up, wages go up
Less spending needed on benefits
Income is more fairly distributed
Poverty is reduced

8. AGAINST
Wages up, therefore costs up, less employment
Other workers want to keep the differential pay – higher paid workers want more.
Inflation will be created
Young and unskilled workers will lose out
Firms will cut back on investment
Poverty wont be reduced
Doesn’t take into account regional differences.

9. Past Paper Questions
2010 Q3 d (8)
2011 Q3 d (8)
2013 Q1 d (8)