13/17 - Wages Up!!?

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Is Wage a Demand-Side Issue, is it merely the employer’s/industries role that determines TVET Wages?

Wages can be viewed from both demand-side and supply-side perspectives, but primarily, they are often considered a demand-side issue in the context of labor economics. Here's how it fits into the DMS framework:

Demand-Side (D)

• Wages as a Demand-Side Issue: On the demand side, employers (businesses and industries) are the ones who demand labor. The wages offered are determined by how much employers are willing to pay for certain skills and labor. This is influenced by the profitability of the business, the productivity of the labor, and the overall economic environment. For instance, in high-income economies with strong business sectors like Germany and Singapore, the demand for skilled labor is high, leading to higher wages.

Mediator (M)

• Government and Policies as Mediators: Government policies and regulations act as mediators in the labor market. They influence both the demand and supply sides. For example, government policies that support education and vocational training can increase the supply of skilled workers. On the demand side, policies that promote economic growth and innovation can increase business demand for labor. Mediators can also include trade unions and labor laws that set minimum wage standards or negotiate higher wages for workers.

Supply-Side (S)

• Labor Supply: The supply side of the labor market consists of workers offering their labor. The number of skilled workers available, their level of education, and their readiness to work at certain wage levels all influence the supply. For instance, if there is an abundant supply of highly skilled workers, it could potentially drive wages down unless demand is equally high. Conversely, a shortage of skilled workers can drive wages up.

Integration of DMS

• Interplay Between Demand, Mediators, and Supply: Wages are determined by the interplay between these three components. High demand for skilled labor (D) coupled with strong government policies supporting vocational training (M) can lead to higher wages, provided there is an adequate supply of skilled workers (S). Conversely, if the supply of labor is high but demand is low, wages may stagnate unless mediated by government intervention through policies such as job creation programs or subsidies for industries to hire more workers.

In summary, while wages are primarily driven by demand-side factors (employers’ willingness to pay for labor), they are also significantly influenced by mediators like government policies and the supply of skilled labor. Understanding this dynamic helps in crafting policies that can effectively manage wage levels and labor market outcomes.

Thank you for your time ❤️