UNIT 3 – MICROECONOMIC DECISION MAKERS
Chapter 3.3 – Workers
Influences on an individual's choice of occupation
Most people work at some point in their lives. An individual's choice of occupation depends
on many factors, which can be categorised as wage and non-wage factors.
Wage factors affecting choice of occupation
The level of salary or wage that a person receives in return for their labour is a major
influence on their choice of occupation.
An important influence on what jobs a person decides to do, is the pay on offer. The total pay
a person receives is known as his earnings. An important consideration in choosing a career is
the wages paid. For example, doctors and accountants usually earn more than electricians and
drivers.
In addition to the basic wage, earnings may also include overtime pay, bonuses and
commission.
1. Wages
Generally, the higher the wage rate on offer, the more attractive the job. For instance,
a person would expect to be paid more as a doctor than as a cleaner.
A salary can be defined as a payment made on monthly basis, calculated on the basis
of a fixed annual rate, irrespective of the number of hours actually worked. In
contrast, a wage may be a payment weekly, based on the number of hours worked in a
week.
Wages are payments for carrying out the works. The higher the wage, the more
attractive the job may seem. However, highly paid jobs typically require a lot of
training and skill development, which can reduce the supply of qualified applicants.
Some dangerous jobs – for example, working on an offshore oil ring – will attract
applicants only if the wages are relatively high.
In choosing an occupation, a potential employee will usually consider the following:
a) Time rate: This focuses on the rate of pay per hour worked, so the more the
hours the more the pay to be received. That is, pay, according to
number of hours for which they work is called as time rate system.
b) Piece rate: This is paid to an employee of a firm per unit of output produced.
Piece rates are often paid in addition to time rates to workers in manufacturing
firms to give them the incentive to increase their productivity. That is, pay,
according to the amount they produce is called piece rate system.
c) Basic Pay is the amount of money that will be received by an employee before
any increments or deductions are made.
2. Overtime pay
Overtime is the hours worked in addition to the basic contracted hours. It is usually
paid at a higher rate compared to the normal hours. The purpose of giving overtime
pay is to encourage people to work ‘unsocial’ hours.
3. Bonuses
A Bonus is used as an incentive to encourage workers to work harder or longer, for
example, to meet a particular sales or production target.
It can be paid to workers who produce above a standard amount, finish a project
ahead of time, secure a profitable contract or contribute to higher profits in some other
way. It can provide an incentive for workers to produce both a high and a good
quality output and to stay with a firm.
Resentment may be caused if it is thought that they are awarded unfairly. This
resentment can lead to those workers, who do not receive a bonus, becoming
demotivated. As a result, the quantity or quality of their output may fall and some
workers may resign.
4. Commission
Commission is a payment made as a percentage of sales that a salesperson makes.
This will encourage the salesperson to be enthusiastic about selling more. Sometimes,
this is an addition to a standard wage and sometimes it makes up their total payment.
