Earning of the people is from different sources. The largest share of
factor rewards contributed to national income is the reward for labour. The factor
reward for the services for labour is wage .i.e. price of labour.
The Labour
market will consists of all those people who are able and willing to supply
themselves for work (supply side) and
all those people and firms able and willing to employ them (demand
side).
There are
many different markets for labour,
i.e. local, national or international.
Labour markets will also exist for every different occupation or type of
skill (computer programmers, carpenters, hair stylists etc.)
Wages paid in all these markets are determined by the forces of demand and
supply of labour and it varies according to various reasons.
There are
many factors that affect an
individual’s choice of occupation. [2014 SP P2 Q1d] These may be of wage factor and non-wage
factor.
The wage factor is the most important
factor considered in choosing the job. It is related to the money income
received. The mode, in which the income is receiving is also to be considered
in this regard. The mode of income may be in the form of daily
wages, commission, work-contract (piece-rate working) or monthly salary. Possible overtime
allowance, bonus payments are also considered in this wage factor.
The quantum
of income derived from the job is not the only factor that affects the
individual’s decision; but the non-wage factors are also to be considered.
The non-wage
factors that an individual consider are;
1) Fringe
benefits or perks available. These are the facilities provided by the employer
free of cost to their employees, such as - company car, Free
life insurance, free pension, free health care facilities and so
on.
2) Promotion
or career prospects,
3) Possible
job satisfaction,
4) The extend
of job security,
5) Location of
the work,
6) Working
conditions,
7) Availability
and types of holidays,
8) Leave
entitlements,
9) Size and reputation
of the establishment,
10) Type or
the nature of work to do,
All of these
things that affect the choice of an individual together are called the net benefits
or advantages of the job.
Changes in the net advantages of a job will cause a shift (change in
demand due to changes other than price) in the supply of labour in an
industry.
For example,
a decline in the pay and the benefits of a job relative to other jobs will
cause a fall in the supply of labour. This may be shown in the above diagram. An
equilibrium wage rate is
determined in the labour market by the demand for, and supply of labour of a particular group
of workers. (When demand for, is equal to the supply of labour)