ABSTRACT
Bringing together the insights of the previous two chapters we are now in a position to understand how the labour market forces of supply and demand determine the price of labour, the wage. We will also examine the process of labour market adjustment to changes in supply and demand. We will explain what compensating wage differentials are. We will also examine the phenomenon of wage inequality, how it has developed over time and how the situation in the UK compares to other countries. Finally we will assess the significance of minimum wage legislation on the labour market.
