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Workers » Choosing an Occupation

What you'll learn this session

Study time: 30 minutes

Cambridge spec: 3.3.1

The wage factors that affect a person's choice of occupation
The non-wage factors that affect a person's choice of occupation
How people trade off wage and non-wage factors when they choose a job

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Why does the choice of job matter?

An occupation is the type of job a person does, such as nurse, bus driver or engineer. Most people spend a large part of their lives working, so choosing an occupation is one of the biggest decisions they make. Like every choice in economics, it involves an opportunity cost: choosing one job means giving up the next best one.

People look at two kinds of factors. Wage factors are about the money a job pays. Non-wage factors are everything else about the job that makes it more or less attractive.

Key terms:

Occupation: the type of job a person does.
Wage factors: the different ways a job pays money.
Non-wage factors: the features of a job, other than pay, that affect how attractive it is.

Wage factors

The total amount a person earns can come from several parts. A job may offer one or more of these:

Basic pay: the agreed amount paid for the normal hours of work, either as a wage per hour or a salary per year.
Overtime: extra pay, often at a higher rate per hour, for hours worked beyond the normal hours.
Bonuses: extra payments on top of basic pay, for example for good performance or for the firm having a successful year.
Commission: pay linked to sales, usually a percentage of the value of what the worker sells.

For example, in the made-up country of Tandria, Sana sells cars. She gets $1,500 a month basic pay and 2% commission on every car she sells. If she sells cars worth $100,000 in a month, her commission is $2,000, so she earns $3,500 in total. A job with commission can pay a lot more than basic pay alone, but only if the worker sells enough.

Non-wage factors

Two jobs can pay the same and still be very different. These are the non-wage factors:

🙂 The job itself

Job satisfaction: how much a person enjoys the work and feels it is worthwhile.

Working conditions: how safe, clean and comfortable the place of work is.

Working hours: how many hours, and at what times, a person must work.

📅 Time and place

Holidays: how many days of paid time off a worker gets.

Location: where the job is, and how far it is to travel.

📈 The future

Training: whether the firm will pay for the worker to learn new skills.

Promotion prospects: the chance to move up to a better job in the same firm.

Job security: how likely the worker is to keep the job and not be dismissed.

🎁 Extras

Fringe benefits: extra rewards, other than pay, that come with the job, such as a company car, free meals, health insurance or a pension.

Some of these can be turned into money terms. A free meal each day, for example, saves a worker money. But a worker who enjoys the job, or who feels safe in it, is gaining something that no pay slip shows.

Trading off wage and non-wage factors

No job is perfect. A job that pays well may have long hours, a long journey or little security. A job with great holidays may pay less. People therefore trade off the factors: they accept less of one thing in return for more of another.

How a person trades off depends on their own situation and values:

A person with a young family may take lower pay for shorter hours, more holidays or a job near home.
A young person with few responsibilities may take a low-paid job that offers excellent training and promotion prospects, because it can lead to higher pay later.
A person who is in debt or has many bills may put the highest basic pay first and accept poor working conditions.
A person nearing retirement may value job security and fringe benefits such as a pension above extra pay.

Made-up example: Kofi is offered two jobs in Marlenia. The first, in a factory, pays $2,400 a month with overtime, but it means long night shifts and a one-hour journey. The second, at a local school, pays $2,000 a month with regular daytime hours, 30 days of holiday and a secure contract. Kofi chooses the school job. His opportunity cost is the factory job, which he gives up, along with $400 a month of extra pay, because the non-wage factors matter more to him.

The same two jobs could be chosen differently by someone else. There is no single correct answer. This is why different people end up in different occupations, and why firms often use non-wage factors to attract workers when they cannot afford to pay more.

Common mistakes

Listing a factor without saying why it matters: "holidays" earns less than "more holidays make a job more attractive to people who want time with family". Treating pay as the only factor: many people accept lower pay for other benefits. Mixing up overtime and bonus: overtime is pay for extra hours, a bonus is an extra payment for results. Calling fringe benefits "wages": they are rewards other than pay, so they are a non-wage factor.

Exam-style question

Read this made-up context. In the country of Brelvia, Maya is choosing between two jobs. Job A is in a bank in the capital city. It pays a high basic pay with a bonus every year, but the hours are long and the journey takes two hours each day. Job B is in a small firm near her home. It pays less but offers good training, 28 days of holiday and a secure contract.

(a) Define a bonus. [2 marks]

(b) Explain two non-wage factors that Maya may consider when choosing between the jobs. [4 marks]

Model answer

(a) A bonus is an extra payment (1) made on top of basic pay, for example for good performance or a successful year for the firm (1).

(b) One factor is location (1). Job B is near her home, so she saves time and travel costs and has more free time (1). Another factor is training (1). Job B pays for her to learn new skills, which may help her get better-paid jobs in the future (1).

(c) Pay matters because people need money to buy goods and services, and a high wage or bonus may allow them to save or support a family (1). A person with many bills may therefore choose the highest-paid job (1). However, pay is not the only factor. Non-wage factors such as working hours, holidays and job security can matter more to some people, for example someone with young children who values time at home (1). A person may accept lower pay if the job satisfaction or training is better (1). Overall, whether pay is the most important factor depends on the person's situation, so it is not always the most important (2).

Exam tip

For a "Discuss" question, give a reason for each side and then finish with a short judgement that depends on the person's situation. Use the context: it is about Maya, not about workers in general.

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