The Distribution of Pay

Labour earnings are the benefit to a worker from selling his labour in the market and the cost to the employer for hiring the worker’s labour services. 1 Thus labour earnings depend on the amount of labour supplied to and demanded in the labour market. The determination of the level of labour earnings in individual cases (for example within the context of individual labour supply and in representative labour markets) was discussed in the previous chapter. There the generic term ‘wages’ was used instead of ‘labour earnings’. In this chapter we are concerned with three different aspects of how labour earnings are distributed depending on whether reference is made to the whole economy, to individual workers or to individual markets.