Why do Different Workers Receive Different Wages?

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The concept and wage structure are very diverse in countries around the world. Work is understood as salary. Salary is the price of labor power formed by an agreement between the employers and workers in accordance with the labor supply and demand relationship in the market economy. Employers pay workers according to employees’ jobs. Wages are money that workers receive when they have completed a job, that job which is not prohibited by law. Wages are more directly linked to labor purchasing agreements and are often used in the areas of production, business and services, and civil employment contract for a limited period of time.

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The concept of wages is commonly used in terms of hiring labor in the free market.

Wages of employees are the main source of living not only for workers but also for the lives of their family members. Some are rich, some are poor, and some lie just right in the middle class, it all comes down to why do different workers receive different wages. Wages denoting labor prices mean that it is a measurement of the level of wages for all types of labor, which is the basis for hiring labor. Different salaries in skilled and unskilled labor, though the job is the same, different workers bring different skills. Different wage-schooling locus gives different salaries, a specific worker will earn if he completed a specific level of schooling, a college graduate would likely earn more than a high school graduate. Discrimination in employment including gender, age, and ethnicity. Earnings inequality depends on how a wage is distributed among groups, such a gender wage gap, the difference between women’s and men’s salaries. The superstar phenomenon, earn extremely high salaries are those that dominate their field. Salaries tend to be higher for those that have higher education, and those that are experienced, and the workers are likely to be paid more if they work at a risky job.

Wages play a particularly important role, deciding in the stability and economic development of the family. If the money is not enough, the living standard of the workers is reduced, they have to get more jobs outside so it can affect their salary results. on the contrary, if the salary paid to the employee is greater than or equal to the minimum wage, it will make the employee feel comfortable, excited to work, pouring all his abilities and strength into the work for the common good and own benefits, in that way, we have strong economic, benefit both the people and the country.

Skilled versus unskilled workers. Their income differs in ability. The book says “High-ability workers earn more than low-ability workers because they have more ability and they acquire more human capital.” The graph below explains it. High ability workers earn higher than low ability workers because they generate a positively skewed distribution. Those who obtain no schooling are considered as low ability workers, and those who obtain large amount of education are considered as high ability workers.

College graduates versus high school graduates. Expected earnings from education have rising ever since. Those with a high school diploma would earn less than college graduates. Because a more educated worker would have national markets for their skills. The least-educated workers tend to experience job loss than educated workers. This reflects in having an increase in the wages among college-educated workers. Their earnings depend on how many years of schooling. The standard model of human capital accumulation shows people are likely to obtain more schooling and work for better paying jobs, because schooling is an option that can maximize their lifetime earnings. The wage-schooling locus graph is shown below.

According McGraw-Hill’s book, the discontinuity in female labor supply over the life cycle generates wage gap for two reasons: Because men tend to acquire more human capital, and women’s skills tend to depreciate during child-raising years. The raw female-male wage gap in the United States says that women earn about 30% less than men. It clearly shows the gender wage gap, and the main factor to why is that women receive less education than men.

However, it is worth noting that both sexes find that men are being treated with more privileges. Specifically, men are thought to be able to easily “”promote”” promotion, receive priority in the recruitment process, have a higher rate of salary increase as well as easier to assess the ability to work better. A large number of male workers agree that they are receiving privileges compared to female colleagues, especially on career development factors. Although the number of men and women in the company does not show a big difference.

For ethnicity, Wage differential between nonwhites is mainly due to differences in educational level on races. the theory in the book about one survey says: average white man earned $15.94 an hour, African Americans: light skin tone earned $14.42, medium tone earned $13.23, and dark tone earned $11.72. So Blacks tend to have lower wages than Whites. The table below shows the wage distribution for Blacks. The labor force participation rate fell precipitously for black men. Education is an option to increase their future earnings. One of the key factors as to why Whites earn more is because Whites are less likely to drop out of school compared to Blacks and Hispanics.

Though it is up to the firm, for a non-discriminating firm, they would hire the group that has the lowest wage. And it is up to the customers, if the price customers pay decreases when interacting with black employees, then the black wages would decrease, this led to the firm having their black workers to have less interaction with customers. This is one of the reasons as to why black workers are paid lower wages than white workers. Thanks to the affirmative action, it says the firms to not discriminate against employees because of their race, sex, or religion; and this has led to an increased in black employment.

Greatest wave of immigration that the United States experienced since early 1800s to present. New immigrants tend to earn less than the natives. They titled as “low-skilled workers”, which could lower the unskilled wage.

The superstar phenomenon is everyone’s dream, only a few people earn extremely high salaries because they dominate their field, they are super productive, and valuable for such a firm, they reach hundreds of consumers in a short amount of time which have a mass production.

The training would increase the worker’s value at any firm. Though proper payroll will be an important useful leverage to stimulate workers to work effectively. In order to be able to conduct a paycheck correctly and to best utilize the basic functions of wages, the labor pay is based on the following basic principles:

“Equal pay for equal labor”. This is the leading basic principle, it reflects the distribution of labor, based on the quantity and quality of labor, ensuring fairness, regardless of age and ethnicity.

“Ensure increase in labor productivity faster than the average wage growth.” For lowering production costs, increasing labor productivity as a condition for production development.

“Ensure a reasonable relationship of wages”. In order to ensure a balanced development between sectors and fields as well as the importance of its meaning. This principle is currently not fully applied, leading to high salary levels. Good skills to quit working enterprises, where there is a higher salary. Or move from one industry to another, causing an imbalance in labor in industries.

If the salary of the employees is too low, it will directly affect the life of the workers, leading to the inevitable consequence that some workers will leave the job and work elsewhere with higher salaries, or workers who are not interested in working, affecting the business result. Receiving a worthy salary with the value of labor will stimulate workers to stick with the business, constantly learn will improve their job, thereby improving labor productivity. Each reasonable price for employees will create community cohesion between workers and employers, between the interests of workers and the interests of businesses.

Point of view on the business side: Despite continuous progress in gender equality in the workplace, there are still significant differences in income between women and men. Equal pay is not just a women’s problem, it is American families, our communities, and the entire economy suffer from the ongoing inequality of salaries. In addition to paying salaries worthy of the employees’ capabilities, employers need to eliminate gender stereotypes associated with job titles as well as have the most advanced roadmap to staff. Ensuring fairness for both sexes requires the participation of all agencies and organizations protecting women’s rights.

The theory of effective wages suggests that high wages increase labor productivity and labor efficiency, not only that but to be able to work long-term is likely to be true. There are some reasons for workers to quit their jobs to find new better jobs, change their jobs due to moving to other places, etc. Companies pay high wages to motivate the workers to not quit the job and therefore the business could avoid the cost of recruiting and training new workers. The common concern when discussing minimum wage increases is the possibility of increasing unemployment. When labor costs rise, the employers often tend to reduce the number of workers to reduce production, thus increasing unemployment. Most of the time, the wage difference is calculated based on the number of years of work.

We need to answer an important question: How to increase labor productivity? Paying a high salary, at least must be enough to maintain a minimum standard of living that will help improve productivity for workers directly or indirectly. Therefore, increasing the minimum wage to ensure minimum living standards for workers is a right choice. Worst cases can happen when a productive worker cannot continue to stick with the company for a long time. Sometimes, the only way to get a raise is to move to work elsewhere.

Overall, wages will vary between different professions by workers providing different labor values. Salary also depends on where employers hire and demand. If demand for labor is high, wages will tend to increase. In contrast, wages will tend to decrease in the surplus labor. Wages of workers in some countries are also dissimilarity if their gender and race are different, as well for low and high ability workers, and educated or not educated.

When the wage is distributed in an enterprise lacks fairness and rationality, it will generate internal conflicts, so the top concern is to fully monitor wage work, regularly listen to and promptly detect disagreements or contradictions that may appear in the distribution of salaries, through which there should be a reasonable adjustment.


  1. Smartbook. Economic online Book. 2019 McGraw Hill Education.


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Why Do Different Workers Receive Different Wages?. (2021, Apr 19). Retrieved from https://papersowl.com/examples/why-do-different-workers-receive-different-wages/