How wages are set, why wages differ between occupations, the role of trade unions, and specialisation.
How wages are determined
Like other prices, a wage is set by the demand for and supply of labour in a particular occupation.
Demand for labour comes from firms; it is derived from demand for the product. It rises if the product is in high demand or workers are very productive.
Supply of labour is the number willing and able to do the job; it rises with higher wages and falls with longer training requirements.
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