Government and government regulations such as enterprise bargaining combined with the interaction of the market forces of demand and supply contributes to create differences in income in a labour market. Therefore this determined the price of labour or the wage levels and the quantity of labour or employment levels. Also factors affecting supply and demand influence the income difference.
The occurrence of differences in income in a labour market is due to the interaction between individuals who are willing to supply their labour to earn an income and employers who are on a demand to obtain the most appropriate labour skills for their production processes. In some areas of a labour market, there may be a high demand with a shortage for workers with specific and high level skills. As a result, some employers are more willing to offer higher pay to them than those with lower skills.
Factors such as the output of the individual firm, general economic conditions, the productivity of labour and costs of other inputs will affect the labour demand and influence the income differences. …
