Workers, Wages and the Labour Market: Question 4

Worked solution

Part (a): Calculating the wage as a percentage

We need the engineers’ wage expressed as a percentage of the baggage handlers’ wage:

$\frac{36}{16} \times 100 = 225$

So the aircraft maintenance engineers’ wage is 225% of the baggage handlers’ wage (i.e. $36.00 per hour compared with $16.00 per hour).

Part (b): Other reasons wages might differ between occupations

Besides differences in skill and training, wages can differ between occupations because of:

• Differences in trade union bargaining strength. An occupation with a strong, well-organised union can negotiate higher wages than one with little collective bargaining power.
• Differences in the demand for and supply of that type of labour. An occupation with high demand but a limited supply of suitable workers will tend to pay more than one with low demand or an abundant supply of workers.

(Other acceptable answers include discrimination between workers, government policy such as a national minimum wage, or whether the job is in the private or public sector.)

Part (c): Explaining the specific wage gap

Skill and training

Aircraft maintenance engineers must complete lengthy, specialised technical training and hold safety certifications before they can work unsupervised. This restricts the supply of workers qualified to do the job, while the airline’s need for safety-critical maintenance keeps demand high. A small supply relative to demand pushes the equilibrium wage for engineers up.

Baggage handling, by contrast, requires very little formal training, so there is a large pool of workers capable of doing the job. This keeps supply high relative to demand, which keeps the equilibrium wage lower.

Trade union bargaining strength

Aircraft maintenance engineers are a small, highly skilled group whose work is safety-critical and hard to replace at short notice. If they are represented by a trade union, a strike would ground aircraft and be extremely costly and disruptive to the airline, giving their union strong bargaining power to negotiate a higher wage.

Baggage handlers are more easily replaced and their absence, while disruptive, does not threaten the airline’s core safety operations in the same way. This gives any union representing them comparatively weaker bargaining power, making it harder to negotiate wages as high as the engineers’.

Final answers

• (a) Engineers’ wage $=$ 225% of baggage handlers’ wage.
• (b) Any two of: differences in demand for and supply of labour; trade union bargaining strength; discrimination; government policy; sector of employment.
• (c) Restricted supply of highly trained engineers relative to demand, combined with their union’s strong bargaining power (since a strike would ground aircraft), explains why engineers earn far more than the more easily replaced, less-trained baggage handlers.