A surgeon earns many times what a care worker earns, though both keep people alive and the care worker may work longer hours in worse conditions. Nothing in the moral value of the work explains the gap. Wages are prices, set in markets, and they are determined by what employers are willing to pay for the output a worker produces and by how many people are able and willing to do the job. Understanding that is uncomfortable but it is the entire explanation.
The demand for labour comes from employers and is a derived demand: nobody wants workers for their own sake, only for what they produce. It therefore rises when demand for the final product rises, when labour becomes more productive, and when the price of substituting capital rises. The supply of labour comes from workers and depends on the wage on offer, the qualifications and training required, the length of training, working conditions, and how attractive alternative occupations are. The wage settles where the two meet.
Wage differences between occupations follow directly. Jobs requiring long or expensive training have restricted supply, because few people are qualified, so the wage must be high enough to compensate for the years of study and forgone earnings. Dangerous, unpleasant or unsocial work commands a compensating differential, though only where workers have alternatives. Highly productive workers, or those whose output sells for a high price, are worth more to an employer. And where a job needs few skills and almost anyone can do it, supply is large and the wage is low regardless of how socially valuable the work is.
Wage differential questions are marked on both sides of the market, and most answers give only one. An answer explaining that surgeons are highly skilled has given the supply side and stopped. Add the demand side, that the value of what they produce is high, and the answer is complete. Say 'supply is limited because...' and 'demand is high because...' explicitly and the structure earns the marks.
Trade union
An organisation of workers that negotiates collectively with employers over pay, conditions and job security on behalf of its members.
A trade union exists because an individual worker bargaining alone against an employer has little power, while all the workers bargaining together have a great deal. Collective bargaining is the process by which a union negotiates on behalf of all members at once. Unions pursue higher pay, better and safer conditions, shorter hours, job security and training, and they represent individual members in disputes. Their strength depends on how large a share of the workforce they represent, how easily the employer could replace them, how profitable the employer is, and the legal framework governing industrial action.
Whether a pay rise is affordable for the employer
A firm employs 200 workers at $30,000 a year and makes an annual profit of $2.4 million. A union demands a 10% pay rise. Calculate the extra wage cost and the effect on profit. Then calculate the productivity gain that would make the rise self-financing.
The demand for labour is described as a derived demand. This means:
Which factor would most increase a trade union's bargaining power?
Draw a labour market diagram with the wage rate on the vertical axis and quantity of labour on the horizontal axis, showing demand for and supply of labour meeting at the equilibrium wage. Then show the effect of a trade union successfully negotiating a wage above the equilibrium, marking the number of workers firms wish to employ and the number wishing to work at that wage.
Label the gap between the two quantities. That gap is the excess supply of labour, which is unemployment caused by the wage being above the market-clearing level. Showing it is what turns 'unions can cause unemployment' from an assertion into analysis, and the same diagram serves for a minimum wage.