Published by Patrick Mutisya · 14 days ago
Workers are the primary suppliers of labour in the market. Their decisions on how much to work, where to work, and what skills to develop are influenced by a range of economic and social factors. In this section we examine the key reasons that determine wages and how discrimination, particularly gender discrimination, can alter the wage outcomes for male and female workers.
Wages are the price of labour. In a competitive market, the wage rate is set where the quantity of labour supplied equals the quantity demanded.
Education, training, and experience increase a worker’s productivity, leading to higher wages. The relationship can be expressed as
Wage = \$α + β \times \text{Human Capital} + ε\$
Wages tend to rise with the productivity of the worker. If a worker contributes more output per hour, the employer is willing to pay more.
Collective bargaining can raise wages above the competitive equilibrium, especially in industries with strong unions.
Wages vary across regions to reflect differences in living costs and local demand for labour.
Minimum wage laws, overtime regulations, and labour standards set floor levels for wages.
Discrimination occurs when employers treat workers differently based on non‑productive characteristics such as gender, race, or age. This can lead to systematic wage gaps even when workers have comparable skills and experience.
Women often receive lower wages than men for similar work. This can be due to direct bias, occupational segregation, or differences in work experience caused by career interruptions.
Workers from minority groups may face wage penalties if employers hold prejudiced beliefs about their productivity.
Older workers may be paid less due to stereotypes about adaptability or productivity.
Consider a simplified labour market where male and female workers possess identical skills and experience. In the absence of discrimination, the wage would be the same for both groups. However, if employers discriminate against women, the wage for women may be lower.
| Group | Skill Level | Experience (years) | Observed Wage (£/hour) | Expected Wage (£/hour) | Wage Gap (£/hour) |
|---|---|---|---|---|---|
| Male | High | 5 | £15.00 | £15.00 | £0.00 |
| Female | High | 5 | £13.50 | £15.00 | £1.50 |
In this example, the wage gap of £1.50 per hour reflects the effect of discrimination. The expected wage is calculated using a standard wage equation that incorporates skill and experience.
Enforces parity in pay for equal work.
Requiring firms to publish wage data by gender or ethnicity.
Educates employers and employees about unconscious bias.
Paid parental leave and flexible working arrangements reduce career interruptions.