wage differentials and wage discrimination a2 economics

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WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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Page 1: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

WAGE DIFFERENTIALS AND WAGE DISCRIMINATION

A2 Economics

Page 2: 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

Page 3: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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?

Page 4: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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.

Page 5: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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.

Page 6: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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

Page 7: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

Wage Differentials Between Groups

Quantity of Labour Employed

Wage R

ate

/MR

P

QC

SC

DCDN

SN

WB

WN

Neurosurgeons

Cleaners

Page 8: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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

Page 9: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

Wage Differentials Between Groups: Part Time and Full Time Workers

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.

Page 10: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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

Page 11: WAGE DIFFERENTIALS AND WAGE DISCRIMINATION A2 Economics

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!