The labour market
Workers supply their labour services in return for wages and salaries. The labour market brings together the supply of workers and the demand for labour by firms. Wage levels and employment depend on the interaction of labour supply and labour demand, as well as on institutional factors such as minimum wage laws, trade unions and government policies.
Factors influencing the choice of occupation
Individuals choose occupations based on a range of financial and non‑financial factors:
- Wages and salaries – higher pay is a strong attraction, especially for skilled jobs.
- Non‑wage benefits – fringe benefits such as healthcare, pensions, holidays and flexible working hours can influence occupational choice.
- Working conditions – safety, hours of work and job satisfaction matter.
- Opportunities for training and promotion – jobs offering career progression and skills development are attractive.
- Job security – occupations with stable employment (e.g. public sector) are often preferred to those with high risk.
- Location and personal preferences – proximity to home and the individual’s interests influence choices.
Wage differentials
Wages differ between occupations and individuals due to variations in demand and supply for different types of labour, the level of skills and education required, the presence of trade unions, and differences in working conditions. For example, doctors and engineers earn higher wages because their skills are scarce and training is lengthy, whereas unskilled work is plentiful and therefore pays less.
| Factor | Impact on wage level |
|---|---|
| Skill and education | Higher skills and qualifications increase productivity and wages |
| Demand for labour | High demand for certain professions (e.g. IT specialists) raises wages |
| Supply of labour | Abundant supply lowers wages; scarce supply raises wages |
| Trade unions | Strong unions can negotiate higher wages and better conditions |
| Government policy | Minimum wage laws set wage floors; taxes and benefits affect take‑home pay |
Training and education improve the productivity and employability of workers, increasing their occupational mobility. Labour markets are influenced by demographic changes, migration and technological advances, which can create new job opportunities but also require workers to adapt to new skills.
