Why Does the Earning of Employees Differ?

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Topic: Factors effecting society Why does the earning of employees differ? Differences in wages between occupations and employees in the same occupations are called wage differentials. For example, an experienced doctor may earn over $200, 00 per year while a farm labourer in the same country may earn less than $10,000 each year. Differences in the wages and earning of workers are common in all countries. For example, the average weekly earnings of full time female employees in the USA were $657 in 2009. Or about 80% of the average weekly earnings of $819 of full time male employees. Wages can also very significantly between countries. Two people with similar skills and experience doing the same job for the same hourly wage but for working different hours each week will have different earning at the end of the week. However, in economics we are interested in explaining differences in wage rates between different occupation and groups of employees using demands and supply analysis. We know the demand for labour is derived from consumer demand for goods and service and depends on how productive labour. We also know that labour supply decisions and related to the net advantages of different occupations. We can therefore use our knowledge of these factors to explain wages differences. Workers do not all same education, training and ability. For example an accountant is a more skilled worker than cashier. If both workers were paid the same amount, very few people would be willing to undertake the many years of study necessary to become an accountant. Because training period is so long for some jobs the supply of these particular workers may be very low and, as a result, their wages may be very high. Perhaps people with skills that are in very short supply relative to the demand for those skills will tend to command very high market wages. This examples why skilled

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