6.7 - Discrimination in the labour market

What is wage discrimination?

Paying different workers different wage rates for doing the same job

What condition is necessary for wage discrimination?

Successful wage discrimination requires employers to be able to identify and separate different groups of workers supplying the same type of labour. This is possible when workers differ in their knowledge of the labour market and in their ability to shop around among employees.

In what ways may workers be paid different amount?

- Formal education

- Qualification and training

- Pay gaps

- Wages and skills

- Gender

- Discrimination

Why does formal education affect pay?

On average, those with a degree earn more over their lifetime than those who gain just A Levels.

Why does qualification and training affect pay?

Jobs which require more training and education offer higher wages. Training workers is expensive for firms, so they compensate for this by offering workers, who have already undergone education and training, higher wages.

Why do skills affect pay?

Skilled workers produce higher outputs than unskilled workers because they are more productive, so the demand for their labour is higher. This means they can demand higher wages.

Why does discrimination affect pay?

Workers might be discriminated against due to age, disabilities, gender and ethnicity. Workers from ethnic minorities have faced prejudice and discrimination.

What are reasons why women earn less than men?

- Women work predominantly in low paid industries

- On average, there attachment to the labour force is weaker

- High labour turnover of women imposes cost on the employer