Answer: The wages in a particular occupation are determined by the forces of supply and demand. The demand for labour represents the quantity of workers employers are willing and able to hire at a given wage rate. The supply of labour represents the quantity of workers willing and able to offer their services at a given wage rate. The equilibrium wage is the point where the supply and demand curves intersect.

Diagram:

How Demand and Supply Affect Wages:

• Increase in Demand: If the demand for labour in a particular occupation increases (e.g., due to increased economic activity or a shortage of skilled workers), the demand curve shifts to the right. This leads to a higher equilibrium wage and a greater quantity of labour employed.
• Decrease in Demand: Conversely, if the demand for labour decreases (e.g., due to a recession or technological advancements), the demand curve shifts to the left. This results in a lower equilibrium wage and a smaller quantity of labour employed.
• Increase in Supply: If the supply of labour increases (e.g., due to a larger pool of qualified workers entering the job market), the supply curve shifts to the right. This leads to a lower equilibrium wage and a greater quantity of labour employed.
• Decrease in Supply: If the supply of labour decreases (e.g., due to fewer people seeking employment), the supply curve shifts to the left. This results in a higher equilibrium wage and a smaller quantity of labour employed.

The elasticity of supply and demand also plays a role. If demand is relatively inelastic (meaning it is not very responsive to changes in wage), a significant change in wage can lead to a large change in the quantity of labour employed. If supply is relatively inelastic, a change in wage will have a smaller impact on the quantity of labour supplied.

The significant wage difference between a highly skilled software engineer and a low-skilled cleaner is largely attributable to differences in their relative bargaining strengths. This difference arises from a combination of factors related to the supply and demand for their respective skills.

Software Engineer:

• High Skill Scarcity: Software engineering requires specialized knowledge and skills that are not easily acquired. The number of qualified software engineers is often limited, creating a scarcity.
• High Demand: The demand for software engineers is consistently high across various industries, driven by the increasing reliance on technology.
• Strong Bargaining Power: The combination of high skill scarcity and high demand gives software engineers significant bargaining power. They can command higher wages and better benefits because employers are willing to pay a premium to attract and retain their expertise.
• Unionization (potentially): While not always unionized, software engineers may be represented by professional associations that advocate for better pay and working conditions.

Cleaner:

• Low Skill Scarcity: Cleaning is a relatively low-skilled occupation that can be easily learned. The supply of workers willing to do cleaning jobs is often high.
• Lower Demand: While cleaning services are always needed, the demand for individual cleaners is often less consistent than the demand for software engineers.
• Weak Bargaining Power: The combination of low skill scarcity and lower demand results in weaker bargaining power for cleaners. They are more likely to find alternative employment and may be less willing to strike or threaten to quit.
• Limited Unionization: Cleaning workers are often not unionized, further limiting their ability to negotiate for better wages and conditions.

In conclusion, the wage difference reflects the fundamental economic principle that individuals with scarce, highly valued skills have greater bargaining power and can command higher wages. The software engineer's skills are scarce and in high demand, while the cleaner's skills are readily available, leading to the observed wage disparity.

Trade unions play a significant role in wage determination by acting as collective bargaining agents for their members. They negotiate with employers on behalf of workers to secure better wages and working conditions. Their influence stems from their ability to:

• Increase worker power: By uniting workers, unions increase their bargaining power relative to individual employees negotiating alone. This makes employers more likely to concede to union demands.
• Threat of industrial action: Unions often threaten strikes or other forms of industrial action to pressure employers into meeting their wage demands. The effectiveness of this threat depends on factors like the union's financial resources, the employer's ability to withstand disruption, and public support.
• Collective Bargaining: Unions engage in formal collective bargaining processes, negotiating terms and conditions of employment, including wages, with employers. This process often involves presenting economic arguments and data to support their claims.

However, the effectiveness of trade unions in achieving their wage goals is influenced by several factors:

• Legal framework: The legal environment surrounding trade unions (e.g., laws on collective bargaining, recognition of unions) significantly impacts their power.
• Economic conditions: In periods of strong economic growth and low unemployment, unions are generally more successful in securing wage increases. Conversely, during recessions, employers may be less willing to concede to union demands.
• Employer strength: The financial strength and profitability of the employer influence their ability to resist union pressure.
• Union membership levels: Unions with higher membership levels generally have greater bargaining power.
• Public opinion: Public support for trade unions can influence employer attitudes and government policy.

In conclusion, trade unions can significantly influence wage determination through collective bargaining and the threat of industrial action. However, their effectiveness is contingent on a range of economic, legal, and social factors.