Wages and the Labour Market
Work is traded in a market where firms buy and workers sell, and the wage is the price. Demand for a skill comes from what it earns the employer, supply from how many people can and will do the job, which is what pay gaps between jobs are made of.
What a learner can do afterwards
- Explain a pay gap between two jobs using demand for the skill and supply of people who hold it
- Predict the effect of a minimum wage set above the market wage, naming both the gain and the risk
- Describe how a union, or a town with one dominant employer, changes the bargain
1 · Read
Jobs have prices too, and they are called wages. Employers demand labour because workers produce things buyers want, so demand for labour derives from demand for the product. Households supply labour by trading hours for pay, weighing wages against rest and study. Where the two meet sits the market wage for that skill. If software booms, demand for coders shifts right and their pay climbs.
Surgeons earn more than cleaners because few people can do surgery while demand for operations stays strong. Risk, night shifts, and long training also push wages up as compensation for hardship and cost. Schooling, talent, location, and bargaining power widen the spread further. Discrimination can twist the pattern, paying equally skilled people differently for no fair reason. To explain any gap, ask which side moved.
Workers can bargain as one through a union, which acts like a single seller of labour. By threatening to strike, the union can lift wages above the lone-worker bargain, often trading some jobs for better pay and conditions. Unions also press for safety rules, pensions, and fair dismissal steps. Employers may answer with lockouts or replacement hires where the law allows. Collective voice shifts the deal but never escapes supply and demand.
A minimum wage set above the market wage works like a price floor. Kept workers gain higher pay, but employers offer fewer jobs, so some seekers go without. The young and low skilled face the highest risk of fewer openings. And in a town with one dominant employer, wages can sit below the competitive level, since workers have nowhere else to go.
Demand for the product pulls, supply of the skill pushes, and power shifts the result.
2 · Watch
Take it off screen
Where it sits
This opens up
Nothing builds on it yet.
Where this leads
8 questions wait behind this lesson, each with its answer explained. Every answer feeds the sky: stars light as they are learned, and dim when it is time to come back.