Why Are Workers Paid Differently Research Paper

Title: Why are workers paid differently? Discuss with reference to the role of the labour market, the state, employers and workers influence (both direct and indirect) in determining pay levels.

Name: Hu Jinkang

Words: 3114

Student number: 16014487

Introduction

In contemporary society, individuals are paid differently. There may be groups unsatisfied with their wages. What causes pay differentials remains a question. This essay will try to figure out some key reasons for this question. This essay will first focus on the elements influencing pay differentials, covering human capital factors, sex and race factors and non-competing groups factors, with discussions and evaluation. Then, this essay will turn to the factors

Acquired skills are call human capital, because investment in physical capital is similar to investment in personal development. Individuals obtain human capital through investing time and money in training, education and experience. As a consequence, productive capacity can be improved (Abercrombie et al. 2000). Lipsey and Chrystal (2015) point out that obtaining human capitals is expensive, and the more skilled the job is ,the more the employers must pay. Burchill (2014) shows that there is a circumstance that when there are few people investing in skills and knowledge in a specific job, higher wages can be achieved because there are few people is in competition for relevant jobs. These two arguments indicate that in order to have good income, it is necessary to have good human capital and to choose right capitals to develop. Lipsey and Chrystal (2015) also highlight two main ways of improving human capital. The first is formal education which allows people gain basic human capitals. Lipsey and Chrystal (2015)argue that those who accept extra education after compulsory education tend to have more human capital. However, a problem of “costs and benefits should be considered. Because costs (money and time) of further education may be earned through work if an individual starts work right after compulsory education. Meanwhile, it can be assumed that unemployable skills which is costly may bring less income in the future

Lipsey and Chrystal (2015) point out that even discrimination including race and gender discrimination make it hard for particular groups to acquire jobs, even if they are equipped by education and skills. Discriminations may be caused by genuine reasons for example human capital. However, discrimination makes sense, because of some ingenuine problems for example historical based ideas. Burchill (2008) describes a situation where men tend to be paid more than women, even if they provide the same human capital. This reflects a shortage of human capital theory that human capital theory cannot explain differentials when discrimination matters. Therefore, there is a situation where there is available labour in the market but employers claim a lack of labour. Just as what Lipsey and Chrystal (2015) conclude, discrimination causes insufficient use of labour. Differentials caused by discrimination is equilibrium, not disequilibrium, because discrimination makes it hard for low-income groups to move to high-income group. Hence, although discrimination is regarded as a serious problem, it is hard to handle. Lipsey and Chrystal (2015) list some problems caused by discrimination in employees’ level: Less job opportunity; Fewer ‘good jobs’; Less secure jobs; Less money; Less labour market power. This problems result that even if the discriminated groups have the right ability to meet the right job, they may still fail to enter. To