ABSTRACT
The analysis of wages is central to the study of labour economics. Significant wage dispersions within individual labour markets have indeed been widely recorded. In the basic model the competitive process governing wages recognizes only the education/consumption choices of individuals in determining labour supply. The effect of supply changes upon wage levels and wage differences between individuals depends critically upon the elasticity of demand for labour, and in turn on the demand for the goods produced by that labour and the substitutability of factors. Amongst the members of any education category, higher quality people will attract higher wages since quality is a significant dimension of productivity. The theoretical model relates to the determination of individual wages, and should therefore be tested using individual data. So far empirical research into the impact of unions upon wages has concentrated upon identifying whether, and to what extent, the union wage differential exists.
