Syllabus: Cambridge - IGCSE Economics
Module: 3.3 Workers
Lesson: 3.3.3 Reasons for Differences in Earnings

Introduction

This lesson supports Cambridge IGCSE Economics learners through Section 3.3.3: Reasons for Differences in Earnings, a core part of the labour market unit. Aligned with the latest Cambridge syllabus, it explores the economic, social, and institutional factors that explain why different individuals earn different wages.

Understanding wage differences provides a powerful link between theoretical economics and the real world, helping students see how markets operate beyond goods and services. This topic also lends itself naturally to careers education, workplace readiness, and Gatsby Benchmark 4 delivery.

Key Concepts

As outlined in the Cambridge IGCSE Economics syllabus, learners should understand the following:

• Definition of wage differentials: Differences in pay between individuals, occupations, sectors, and regions.

• Causes of wage differences, including:

  • Education and skills: Higher qualifications typically attract higher pay.

  • Experience and training: More experienced workers often earn more.

  • Job responsibilities and risks: High-responsibility or dangerous roles command wage premiums.

  • Labour market conditions: Supply and demand imbalances for different occupations.

  • Discrimination: Gender, ethnicity, or age-related pay gaps.

  • Public vs private sector pay structures.

• Role of trade unions and how collective bargaining can influence wages.

• Impact of government intervention: Minimum wage policies and their influence on earnings.

These are not only important in understanding how economies function but also vital in shaping students’ awareness of the workplace they are about to enter.

Real-World Relevance

Recent data from the UK Office for National Statistics (ONS) shows persistent wage gaps across sectors and demographics. For example:

• STEM vs service sector: Graduates in engineering can start on salaries 30% higher than those in hospitality.

• Gender pay gap: Despite equal pay legislation, the UK still reports a median hourly gender pay gap of around 14.3%.

• Public vs private sector: Public sector roles often offer lower base pay but better job security and pension contributions.

Mini Case Study:

A London-based software engineer with five years of experience may earn £55,000, while a care worker with similar experience may earn £24,000. The difference reflects not only skill scarcity but also sectoral demand, working hours, and bargaining power through unions.

These examples help ground economic concepts in real-life career decisions and socio-economic realities.

How It’s Assessed

The Cambridge IGCSE typically assesses this topic through:

• Structured questions: Asking candidates to explain or analyse reasons for wage differentials.

• Data-response items: Interpreting wage statistics or labour market graphs.

• Extended writing: Justifying the impact of policy decisions (e.g. minimum wage) on earnings.

Command words commonly used include:

• Explain: Describe with reasons.

• Analyse: Break down into components and examine.

• Discuss: Weigh up arguments or factors.

• Evaluate: Judge effectiveness or importance with evidence.

Students should practise constructing balanced arguments and drawing conclusions from real-world contexts.

Enterprise Skills Integration

This topic offers rich opportunities to build decision-making and commercial awareness:

• Commercial Awareness: Understanding how wages reflect market conditions helps students see how organisations operate and allocate resources.

• Decision-Making: When learners explore why different jobs pay different amounts, they develop critical thinking around personal career paths and societal fairness.

• Problem-Solving: Analysing wage inequality challenges students to think about potential interventions—such as legislation or education reforms—and their trade-offs.

Enterprise Skills simulations (like those from Skills Hub Futures) can simulate hiring decisions or wage setting in a virtual organisation, helping students apply theory to workplace-like decisions.

Careers Links

This lesson aligns directly with Gatsby Benchmarks 4, 5, and 6:

• Benchmark 4 (Curriculum to Careers): Helps students see how subject knowledge relates to real earnings, workplace choices, and economic policy.

• Benchmark 5 (Employer Encounters): Can be linked with guest talks from local professionals on earnings in their sector.

• Benchmark 6 (Workplace Experiences): Encourage students to interview family members or complete virtual placements to learn about wage-setting and career progression.

Relevant roles to highlight:

• Human Resource Manager

• Economist

• Trade Union Representative

• Civil Servant (e.g. Department for Work and Pensions)

• Financial Analyst

• Careers Adviser

Teaching Notes

Suggested Activities:

• Role play: Simulate a wage negotiation between a union rep and HR manager.

• Graph task: Provide earnings data and ask students to interpret disparities across sectors or regions.

• Mini-debates: “Should the minimum wage be higher for London?” or “Do footballers earn too much?”

Common Misconceptions:

• Students may think all wage differences are due to qualifications. Clarify the role of scarcity, risk, and unionisation.

• There’s often confusion between gross and net pay—link to personal finance sessions where possible.

Extension:

• Use Skills Hub simulation tools to assign students the task of designing a fair pay structure for a fictional company.

• Compare UK wage structures with another economy (e.g. Germany or the US) to explore how policies affect earnings.

Differentiation:

• Provide tiered tasks with guided scaffolds for lower-attaining students.

• Invite students to research their desired career and present average starting salaries, linking this to the lesson content.