Introduction
Economics refers to the study of how people make decisions on how to utilize their resources. This is important because in the society we are living today; our needs and wants are more than our ability and capacity to meet them, as resources are so limited. This leads to meeting some needs and foregoing others (Smith 38).
Often, people use the resources they have for the improvement of their well-being, which can include satisfaction people get after using some goods and spending time in work. Economics generally is the study of labour, physical resources like land and buildings, and investments.
In most cases, for people to meet their needs they have to work. Labour provides the standard measurement of amount of work done, whose compensation is in terms of wages. In this paper, I am going to examine the different reasons that make the people get different wages. I will discuss these reasons next.
Reasons as to Why People Get Different Wages
In economic terms, wages are payments given to a worker because of offering some services or because of toiling or working hard. Workers often get different wages. There are a number of factors, which cause these wage differences. I will discuss each of this as a separate identity.
Education
In most cases, a person with higher level of education earns more money, as compared to a person with low level of education. For instance, an O-level graduate working as a port cleaner will earn less money than a bachelor’s degree holder will. In the same way, a banker with an MBA in finance for example, is in a higher income bracket in comparison with his counterparts who are degree holders. Although investing in education is, expensive both in terms of money spent and in terms of time used, nonetheless, the reward comes in the form of income one is able to realise.
Therefore, accumulating education is a foregone opportunity and there is the need to compensate the individual according to the time and resources used in education (Chu 41). The differences in level of education are caused by different factors which include level of income of parents, ethnic groups and motivation from parents among others. However, it is worth to note that people with the same level of education may also earn different wages due to other reasons as will be shown later in the discussion.
Skills
Skill is the ability and capacity to carry out activities or jobs functions using less time or energy. Acquisition of these abilities and capacity is through sustained effort deliberately and systematically.
The skills are cognitive, technical or interpersonal. There are three levels of skills unskilled, semi-skilled and skilled. In economics, skilled labourers often earn more than unskilled labour (Freeman and Ronald, p. 590). The reason for this is that people with more skills usually produce more and this increase the returns. Moreover, since wages are the cost of production of employers they would always like to employ people that will bring more outputs and thus increase their profits.
In addition, for skilled labourers, their demands are so high as compared to the supply both in service and in manufacturing sectors. This makes those people with skills to be more selective to jobs depending on the amount of money they are given and as a result, employers have to pay them more money so as to attract and retain them. Moreover, skilled workers produce good and expected results within a short period compared to the unskilled labourers. As a result, If they are paid in terms of hours, the amount of money spent by employers will be minimal compared to the money they would have used if they employed unskilled labourers to perform the same task.
Gender
Gender refers to the roles, behaviours, and activities that are socially appropriate to men and women. For instance, traditionally it is the role of women to take care of children and the elderly. Gender causes wage disparities in many ways. In most cases, women earn less than men do. The reason behind this is that women spend more time taking care of the family as well as household chores as compared to men.
In addition, women also get maternity leave. This makes them not to take the high positions like CEO, as companies fear losing them during this period. In such cases, companies’ prefer men to women. Moreover, women choose jobs that are less demanding in terms of time and less risky and will therefore not benefit from compensation that are given to those who work in risky jobs with poor conditions (Heather, p. 28).
Socially there are jobs that are termed as men’s and other as women’s, this has made women to opt for teaching and healthcare jobs that are less paying in comparison with other jobs like engineering and medicine. This results from the fact that women are more concerned with the well-being of their families than their careers.Lastly, married women with children are less likely to be hired for jobs and even if they are hired, they will be paid less amount of money as compared to married men with children.
Location
The place where a person works influences the wages that one will get. For example, those in rural areas in most cases will receive less amount of money than those working in the city because life in the city is so expensive as compared to life in rural areas. In addition in case of people with the same occupation and one is working in hardship area he will get more wages due to hardship allowances than one working in very conducive areas.
Efficiency
Efficiency refers to maximum utilization of resources in order to produce quality goods i.e. using minimum inputs but producing more outputs. Workers with high efficiency get high pay than those with low efficiency. This is because workers with high efficiency will receive more rewards to keep them motivated
Individual Preferences
Personal interests can also affect wage differences. For example, people who prefer having more of leisure time than working hard will usually get fewer wages where wages are paid in terms of hours one have worked for.
Religion and Culture
Some religions and cultures associate wealth with evil and therefore discourage their members from working hard and applying for well paying jobs. As a result, their wages level remains low.
Trade Union Protection
These unions protect workers from exploitations by their employees. Workers who have trade unions are likely to have more wages than one without as employers will always fear the reproach of the trade unions. For example, teachers receive higher pay than cleaners because they have trade unions.
Conclusion
From the discussion above, wages of individuals differ from one worker to another. For example, workers having the same level of education and occupation may get different wages. There are many factors that lead to this to this disparity and they include level of education, skills acquired by an individual, and gender, among others.
From labour economist who studies different issues concerning market labour e.g. supply and demand of labour in an attempt to know employment, wages, and income show that though productivity is the one that highly determines the wages of individuals other factors like fairness which is determined by comparing ones’ salary with others is also another contributor of wage differences.
In addition, there is need to expose members of the society to the same living conditions and with this it is wise to pay a person with a family more money than one without but still working in the same sector. Hence, when determining the wages of individuals many factors have to be put into consideration.
Works Cited
- Chu, Hong Yih. The impacts of Educational Expansion and Schooling Inequality on Income Distribution. Business and Economics, 39.2(2000):39-49.
- Freeman, Richard and Ronald, Schettkat. Skills Compression, Wage Differences, and Unemployment: Germany Vs. The US. Oxford Economic Papers, 53(2001):582-603.
- Heather, Thomas. Pointing fingers: Causes for Gender wage gap. New York: G.P Punami’s Sons, 2008. Print.
- Smith, Adam. Inquiry into the Nature and Causes of the Wealth of Nations. London: W. Strahan & T Cadell, 1776. Print.