Chapter 10

• Wage differentials can occur between different occupations and same occupations.
• Reasons of wage differentials for different occupations:

  • The environment/work conditions; some occupations are "harder" to work in, such as CEO
  • Some occupations have low occupational mobility
  • Stability in job position
  • Employee hierarchy, experience, skill, education
• Reasons for wage differentials for same occupations:

  • Employee hierarchy, amount of skill, experience, and education
  • Capacity of the firm to pay
  • Productivity of the labor
  • Geographical mobility of the individual
• Wage differentials are a monetary motivator for certain occupational positions which may be demanding by nature or rewarding towards individuals who have higher mobility, experience, productivity, education, and skills.
• Nominal wage: The sum given to an employee

  Real wage: Nominal wage adjusted to inflation

  Real wage can be affected through shifts in nominal wage and inflation
• Age can affect wages, as age increases, amount of wages increase, however, after a certain point, amount of wage decreases as individuals eek retirement (similar to the savings and dis-saving graph)
• Gender can affect wages, as women:

  • Face a glass ceiling towards higher positions
  • Have domestic duties, such as, parental duties for children. Due to this, long-term employment occurs and women become discouraged jobseekers for future roles
• Migrant workers arrive in Australia due to skilled immigration, thus, they are more skilled. However, in lower paying positions, they get paid lower than the average born Australian, but in higher paying positions, they get paid more than average born Australian.
• Enterprise bargaining is a negotiation between the employer and the employee on salary.
• Income distributions: How and where wages are distributed across the population.
• Non wage outcomes/fringe benefits cannot be quantified, such as:

  • Employee discounts
  • Company funded equipment
  • Flexibility in work conditions
  • Leave days/paid days
  • Funded travel (business-related) journeys
• Wage outcomes help determine income brackets and income distribution, however, non wage outcomes are an external motivator and their value can vary from person to person.
• Benefits of inequality include:

  • Entrepreneurs willing to take higher risks
  • Entrepreneurs investing more in Capitol
  • The labor force being motivated to get higher education and skills
  • The labor force having higher productivity and working longer hours, leading to higher economic efficiency
  • The labor force being more mobile
• Types of unemployment:

  Cyclical

  Frictional

  Structural

  Long-term

  Seasonal

  Hard-core

  Hidden

  Underemployment
• Types of unemployment


  • Structural
  • Seasonal
  • Frictional
  • Hard-core
  • Hidden
  • Long-term
  • Cyclical
• Structural unemployment


  When some skills of the employee become redundant due to structural changes in the economy; changes in the process by which pattern of production is altered
• Seasonal unemployment


  Independent of the business cycle, occurs through seasonal changes as the business works best in the specific seasonal environment
• Frictional unemployment


  Occurs when an individual changes careers/firms
• Hard-core unemployment


  When an individual cannot seek work due to disabilities or other issues
• Hidden unemployment


  Discouraged job-seekers, can be caused through other unemployment types
• Long-term unemployment


  When an individual has been unemployed for >12 months, the longer an individual is unemployed, the lesser likelihood of employment
• Cyclical unemployment


  Determinant of the business cycle and mostly occurs when the business cycle is in prolonged downturn, and doesn't expand as much to suffice for the contraction
• Underemployment


  When individuals seek to work for a longer time