Learn › Economic theory › Work and what it pays

Work and what it pays · 4 of 10

Why wages differ between jobs

Explain why two jobs in one economy pay differently

Each kind of work has its own labour market

No single labour market exists. Every type of labour, divided by the kind of work, the skill level and the location, has its own market with its own demand and supply. So a scientist's pay and a shop assistant's pay are set in two separate markets.

Demand is higher where a worker's output is worth more

A profit-maximising employer will never pay a worker more than the value of that worker's marginal product. So the demand for a type of labour is strong where each worker's extra output is worth a lot to the firm, and weak where it is worth little.