CIE IGCSE Economics 0455 Section 3 - Unit 17

Ayman Alam

CIE IGCSE Economics Notes

UNIT 17 – Choice of Occupation Methods of payment

Factors That Influence the Choice of Jobs There are a wide range of factors that influence the choice of jobs. They can be divided into two main sectors:   

Wage factors (Monetary factors) Non-wage factors (Non-monetary factors) Limited Factors

Wage Factors The pay on offer plays a significant role in the influence of what job a person decides to do. The total pay received by a worker is known as earnings. Wage factors include:    

Basic wage (Wages) Overtime pay Bonuses Commission

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Ayman Alam

CIE IGCSE Economics Notes

Wages      

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Generally the higher the wage, the more attractive the job is.

For example a person would expect to be paid more as an engineer than as a factory worker.

A wage is a payment made weekly, based on the number of hours a person has worked for in a week.

A salary is a fixed income made on a monthly basis and is not dependant on the number of hours worked.

Some hours are paid according to a time rate system while some workers are paid by a piece rate system.

Time rate system – Workers are paid per hour (e.g. $10 an hour). It is a very convenient system as employers will easily be able to measure the labour costs. It can also be beneficial to the workers as they can try to bargain about the rate more easily.

Piece rate system – Workers are paid according to the output produced (e.g. $10 per piece).

This system can only be used if the product is standardised and a worker’s output can be easily measured. This system can be found in the manufacturing sectors and the primary sectors mainly, but rarely in service sectors. For example a piece rate system cannot be applied to doctors as one doctor may be carrying out more operations than another doctor or one doctor are carrying out more complex operations than Wage rate – a another one. Less supervision is required in this system and payment which an workers are more focused on the output they produce. This can employer contracts to lead to potential health risks as some workers may feel more pay a worker pressurised to produce more output to make ends meet.

If the supply of labour is low, then wage rate will be high and if the supply of labour is high then wage rate will be low.

Overtime Pay     

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Overtime pay is paid to workers when they work more than their standard working hours in a week.

It is usually paid at a higher rate.

For example if a worker is paid $10 an hour and then works overtime, his overtime pay may be $15 an hour.

Workers, who are afraid to ask about the increment of their pay, see overtime pay as a benefit to them and may be attracted to the job offers which offer this privilege.

Overtime Pay VS Hiring New Workers - Overtime pay can be a lot more beneficial than hiring new workers from the eyes of employers. If there is a higher demand (for a certain good/service) for a limited period of time, employers can increase overtime pay for workers who, in return, will be attracted to this advantage. It is cheaper, easier and less disruptive to introduce overtime pay rather than hiring new workers for a short period of time. On the other hand, if demand decreases for a certain good or service, overtime pay can be reduced rather than giving the boot to the workers who were hired for a period of time.

The disadvantage of overtime pay is that workers may get exhausted after working for a long time. Less effort would be put per hour and even the quality of the good/service might fall.

Bonuses 

A bonus is an extra payment issued to workers who produce above a standard amount of goods, achieve their goal, contribute to higher profits or secure a profitable contract.

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CIE IGCSE Economics Notes

This motivates a worker to produce high quality output.

It also makes a worker want to stay with the firm, seeing that it provides bonuses if the target is achieved.

However, it is thought that those who don’t receive any bonuses get demotivated. This can result in a fall in the quality of goods produced an even resignation of the worker.

People who have confidence in their ability and like challenges would be attracted to jobs giving bonuses.

Commission   

Commission is often paid to sales people.

It involves them receiving a proportion of the value of sales made and is similar to a bonus.

Sometimes it adds up to their standard income and sometimes it makes up their total payment.

Non-wage Factors People don’t always choose the highest paid job offer. Some other factors are taken into account such as:          

Job satisfaction Type of work Working conditions Holidays Pensions Fringe benefits Job security Career prospects Size of the firms Location

Job satisfaction 

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Some jobs may not be well paid occupations but they do provide satisfaction. For instance nurses may not be paid well but they do feel pleased with themselves for helping a patient’s health improve. Teachers don’t get paid a lot but they feel proud of themselves when they educate their students.

Some jobs such as brain surgeons and athletes do get paid a huge amount of money and also find their jobs very interesting, challenging and satisfying.

Type of work   

Most people prefer non-manual work than manual work as they find it physically less tiring and also more mental stimulation is offered.

Non-manual work tends to be better paid as well.

However, some people are prepared to undertake risky tasks such as bomb disposal but most people prefer to do non-manual jobs as they provide a safer environment.

Working Conditions 

People like to work in a pleasant and safe surrounding with friendly colleagues and the privilege of taking regular breaks.

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CIE IGCSE Economics Notes

Working hours 

Different occupations have different number working hours expected from the workers and different timings as well. The different types of working patterns are shown below:

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Flexible working hours are seen as an advantage as workers can work for longer hours when the demand for a product is high.

Nurses, plumbers and catering staff may work in unsociable hours such as nights and evenings when most people are enjoying their leisure time.

Some occupations such as factory workers and watch guards work in shifts (e.g. 6 hours per person).

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Holidays   

In many countries, the law sets the minimum length of holiday entitlement for full time workers.

Teaching is well known for the length of holidays it comes with (winter break, summer holidays, etc.). This is why some people prefer teaching as they can take long holidays.

Working parents can go on a holiday with their family as well.

Pensions    

A pension is a payment made to people who have retired from work.

Some jobs provide their workers with pensions after retirement while others don’t.

Generally, workers in the public sector (state or government jobs) receive more generous pensions than those in the private sector (private firm jobs).

For example, an army officer is more likely to receive generous pensions while an agricultural worker may not even receive any pension.

Fringe benefits   

Fringe benefits are additional benefits which have a monetary value.

Some examples are free or subsidised meals, health schemes and leisure facilities.

For example, a worker can be given a laptop and mobile phone as fringe benefits.

Job security  

Most people are attracted to jobs that offer very high job security. This means that the workers are less likely to be sacked.

Government (public sector) jobs offer a much higher job security than private sector jobs.

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CIE IGCSE Economics Notes

When the demand for a product is high, the job security of an occupation also increases as the employers don’t want to get rid of their employers.

Generally the riskier a job is, the higher the worker gets paid.

Career prospects 

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People often accept low wages at the start of their career, hoping that they will gain promotion to a well-paid and satisfying post in the future.

After passing examinations and gaining experience, professions such as doctors expect their pay to rise to a relatively high level.

Size of the firms  

People are often more attracted to large firms because they pay more, offer more fringe benefits and have a higher job security.

Why can a larger firm pay higher wages to its employees? – Larger firms can pay more because they have reduced costs per unit and increased total output of a product. This is known as economies of scale and so larger firms can pay more money to their workers.

Location  

If the occupation is close to the person’s home, that person may consider taking that job offer so that he/she will not have to spend money on transport.

On the other hand, if the location is a hard place to go to, the worker might have difficulties in coming to that area and so may resign if no means of transport is arranged by the employers.

Limiting Factors Limiting factors affect people’s choice of occupation. Some of them are:     

The skills the person has The qualifications they have The experience they have Occupational mobility Geographical mobility

Occupational choice and opportunity cost Choosing to join a job means that there is an opportunity cost involved (other occupations are lost, leisure time is lost, etc.). For example a person may give up his/her well-paid job and join a less well paid job for more job satisfaction, fringe benefits, etc.

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Ayman Alam

CIE IGCSE Economics Notes

QUESTIONS FROM PREVIOUS PAPERS ON UNIT 17 Cambridge IGCSE – October/November 2014 0455 21 (Q4) Different workers can be paid vastly different amounts of money. Sometimes this can be due to the level of skill that different workers have, and sometimes it can be influenced by whether a worker is in a trade union or not. (a) Describe three factors that can influence an individual’s choice of occupation. [6] 1 mark for each of up to three factors identified e.g.: • • • • • • • • • • • • •

wage/salary/overtime payments working hours bonus/commission/profit-sharing job security skills/training/qualifications needed proximity to home/travelling distance availability of overtime work promotion/career enhancement prospects job satisfaction social/welfare/sport facilities fringe benefits pension scheme holiday entitlement

1 mark for each related description e.g.: • • •

skills/training/qualifications needed: means that some workers cannot apply / and others will take long time to train/study first travelling distance: if close to home, saves time/reduces costs job security: reduces risk of unemployment/provides continuity/certainty of income for the future

(b) Explain two reasons why an unskilled worker is usually paid less than a skilled worker. [4] Up to 2 marks for reasons identified: • •

a lower level of demand for an unskilled worker (1) a relatively high supply of unskilled workers (1)

Up to 2 marks for explanations: • •

lower demand because of lower efficiency/productivity/value added of the unskilled worker (1) higher supply because little time needed to train/study to gain the requirements needed for the job (1)

The first 2 marks can be given instead for an appropriate demand and supply diagram.

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Ayman Alam

0455/12/F/M/17 (Q8)

0455/12/F/M/17 (Q9)

0455/12/F/M/17 (Q10)

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CIE IGCSE Economics Notes

Ayman Alam

0455/12/F/M/16 (Q9)

0455/12/F/M/16 (Q10)

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CIE IGCSE Economics Notes

Ayman Alam

CIE IGCSE Economics Notes

0455/12/F/M/16 (Q11) Cambridge IGCSE – May/June 2015 (Q4) d) Discuss whether a rise in the wages a firm pays would reduce its profits. [8] Up to 5 marks for why it might: •

higher wages will mean a higher wage bill (1) if output does not increase by more than wages, labour costs per unit will increase (1) costs of production will increase (1) profit is revenue minus costs (1) with higher costs and the same revenue, profit will fall (1)

Up to 5 marks for why it might not: • • • • • • •

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paying higher wages may prevent strikes (1) this can reduce costs of production (1) higher wages may motivate workers (1) this can increase productivity (1) reduce costs of production (1) higher wages may make it easier to recruit workers (1) this can reduce costs of production (1) higher wages may make it easier to recruit skilled workers (1) this will raise productivity (1) reduce costs of production (1) other costs may be falling (1) e.g. rent, corporation tax (1) demand for the firm’s products may be increasing (1) this will raise revenue (1) higher wages may be paid to a smaller labour force (1) reducing the wage bill (1)