An individual’s choice of occupation depends on lot of factors which can be categorised as Wage factors and Non-Wage Factors.

Wage factors

An important consideration in choosing a career is the wages paid. For example, doctors and accountants usually earn more than electricians and drivers.
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:

  1. Time rate: This focuses on the rate of pay per hour worked, so the more the hours the more the pay to be received.
  2. 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.
  3. Basic Pay is the amount of money that will be received by an employee before any increments or deductions are made.
  4. 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.
  5. 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.
  6. 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.

Non-wage factors

Non-wage factors are highly influential on the choice of occupation. They include:

  1. Job-satisfaction: many people are prepared to work for a lower pay if they enjoy the work. Some people prefer to work for a company with regular income, while others prefer the freedom of working for themselves.
  2. Career Prospects: many people want to work in occupations where there is opportunity for promotion.
  3. Fringe benefits these are non-financial incentives given to employees. For example: subsidised housing, company car or subsidised transport, subsidised company products etc.
  4. Level of challenge: If a job requires thinking skills or it is repetitive and boring.
  5. Job security: Most people want to be sure that the job they choose to do will be secured and that they will not be laid off.
  6. Length of holidays: many countries have implemented labour laws requiring that the workers get a certain number of days as holidays.
  7. Travelling distance: having to travel a long distance to attend to the work may make an individual seek employment at a firm which is nearer to home, even if the firm which is nearer to home pays a lower salary.

Wage Determination

Wages are determined by the interaction of demand and supply of labour.

The demand for labour refers to the number of workers that firms are willing and able to employ at a given wage rate. demand for labour is a derived demand, which means that labour is in demand because of the goods & services it produces and not for itself.

Factors influencing demand for labour to increase

  1. an increase in consumer demand ;
  2. an increase in labour productivity;
  3. an increase in the cost of equipment;
  4. a fall in non-wage employment costs, e.g. pension contributions, health and safety costs

Factors influencing demand for labour to decrease

  1. a fall in consumer demand
  2. a fall in labour productivity
  3. a decrease in the cost of equipment
  4. a rise in non-wage employment costs

The Supply of labour refers to everyone in an economy who is of working age and is both willing and able to work at different wage rates.

Factors influencing supply of labour to increase

  1. an increase in its net advantages;
  2. an increase in the population of working age;
  3. an increase in the amount and quality of education and training available in relevant skills

Factors influencing supply of labour to decrease

  1. a fall in its net advantages;
  2. a reduction in the population of working age;
  3. a reduction in the amount and quality of education and training available in relevant skills.

Differences in Earnings

Occupational Wage Differentials:

  1. Different abilities & qualifications
  2. Dirty jobs & Unsociable hours
  3. Job Satisfaction
  4. Lack of information about jobs & wages
  5. Labour Immobility

People doing the same Job

  1. Regional differences in labour demand & supply condition
  2. Length of service
  3. Local pay agreements
  4. Discrimination
  5. Non monetary rewards differ

Division of Labour

This means dividing work into different part or processes which are performed by one or group of workers according to their ability and aptitude. A good example of division of labour is found in mass scale production factory, where workers are classified according to the nature of work performed by them, e.g. Foreman, Technician, Electrician etc


  • Increased productivity(higher output per worker per hour)
  • Higher living standards
  • Increased productivity leads to reduced cost per unit of output and therefore increases efficiency.
  • Worker becomes highly skilled in a particular task due to repetition
  • No time is wasted moving from one job to another
  • Less time required to train workers for specific tasks
  • More choice as workers can specialise in jobs they are most suited to


  • Repetition creates boredom and monotony
  • Breaking down the production process into different tasks makes it easier to replace humans with machines and this leads to structural unemployment
  • Division labour creates interdependence in production. If one group of workers goes on strikes it brings the whole production process to a halt.