Wage differentials are differences in wages such as that between brain surgeons and waiters
* They occur between occupations, industries, firms, regions, and within these categories
* Wage differentials can be explain by supply and demand, bargaining power, the impact of government policy and public opinion
* Over time, wage differentials between groups can change
* E.g. the gap in wages between premier league players and division 2 players has widened over the last 2 decades, as the premiership’s revenue has increased greatly.
Wage Discrimination is a cause of labour market failure and a source of inequity in the distribution of income and wealth and it is usually subject to government intervention e.g. through regulation and legislation. Discriminatory treatment of minority groups leads to lower wages and reduced employment opportunities, including less training and fewer promotions. The result is that groups subject to discrimination earn less than they would and suffer a fall in relative living standards.
This is an example of the wage discrimination. As you can see the supply of black female workers is the same as the white male workers. But because of the gender discrimination males are on a significantly higher wage rate
Wage Differentials and discrimination between Particular Groups
Skilled and Unskilled Workers:
* Skilled workers are paid more than unskilled workers, as demand for skilled workers is higher, and their supply is less
* MRP for skilled workers is high, as the skills possessed will often lead to higher output per worker
* It is more difficult to substituted skilled labour with capital and unemployed workers than it is for unskilled
* Skilled workers have a high level of human capital
* Human capital is the skills, knowledge and experience that workers possess
Male and Female Workers:
* Men are paid more than women, despite equal pay... [continues]
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