Wage Differentials (CIE IGCSE Economics)

• Workers are paid different amounts (wage differentials) due to a number of factors, including
  • Gender pay differences
  • Industrial sector pay differences
  • Private & public sector pay differences
  • Differences in pay between skilled & unskilled workers

   

Reasons for Wage Differentials Between Men & Women

1. Men usually work full-time whereas women often work part-time in order to meet the demands of motherhood/childcare
2. Men usually have an uninterrupted  career journey whereas women often take time away from work (motherhood/family) & so miss opportunities for advancement
3. Women are more likely to accept a job below their skill or quantification level if it fits in with the needs of looking after their children
4. The gender pay gap is a form of discrimination & occurs when a women is paid less than a man who is doing exactly the same job

Reasons for Wage Differentials in the Primary, Secondary & Tertiary Sectors

• Primary sector workers are usually paid low wages due to the unskilled nature of the job & the fact that raw materials often generate the lowest profits in the production chain
• Secondary sector workers add value to the raw materials & these products sell for higher profits. Therefore wages tend to be higher than primary sector wages
• Tertiary sector workers are paid the highest. Their jobs often require highly valued skills that take years to acquire & the products they sell or services they provide can be complex & expensive e.g. artificial intelligence coders

Reasons for Wage Differentials Between Private & Public Sector Workers

• Public sector organisations are owned & controlled by the Government 
• Private sector organisations are owned & controlled by private individuals & firms
   

Reasons for Wage Differentials Between Private & Public Sector Workers

Private Sector Workers

Public Sector Workers

Salaries can be extremely high, especially if the value of goods or services offered is high & the workers are productive    Some salaries can also be very low as firms seek to cut costs & maximise profits e.g. garment sector worker in Bangladesh get paid very little for the work they do Many wage benefits tend to be better than those provided by the public sector e.g. bonuses or share options

Wages will reach a maximum ceiling that is often below what the private sector may offer e.g. public school teachers are paid less than private school teachers Wages often do not fall as low as some private sector jobs as many public sector workers belong to trade unions    Job security is high resulting in long careers with defined pathways for promotion    Pensions are often very good, but are limited in comparison to private sector pensions

Reasons for Wage Differentials Between Skilled & Unskilled Workers

• Many economies have a high supply of unskilled labour. This means that employers can push wages down as there is always someone willing to work for less (take it or leave it approach to wages)
• To become skilled takes time & money which means that there is a  more limited supply of specific skillsets. In recognition of these factors, wages for skilled workers are higher