Cambridge IGCSE Economics: Workers, wages and trade unions (0455) – Revision Notes

This page condenses sections 3.3 (Workers) and 3.4 (Trade unions) of the Cambridge IGCSE Economics 0455 syllabus for examination in 2026. Full explanations are in the study guide; test yourself with the practice set. Related links: Microeconomic decision makers, the course hub, the printable checklist and the free diagnostics. All figures are invented.

Definitions to know

Term	Meaning
Wage	The price of labour, paid per hour, day or week
Derived demand	Demand for workers that comes from demand for the goods they make
Equilibrium wage	The wage where the quantity of labour demanded equals the quantity supplied
Minimum wage	A legal floor under the wage
Discrimination	Treating workers differently because of who they are rather than their skill
Division of labour	Splitting production into tasks done by different workers
Specialisation	Concentrating on the activity a worker, firm or country does best
Trade union	An organisation of workers that aims to protect and improve members’ pay and conditions
Collective bargaining	Union and employer negotiating for all members together

3.3.1 Choice of occupation

• Wage factors: pay rate, overtime, bonuses, commission.
• Non-wage factors: security, hours, conditions, promotion, training, holidays, pension, interest in the work, location and travel cost, own qualifications.
• Method: add up the whole package. Job A at 2,600 against job B at 2,400 plus 300 allowance: B is worth 2,700.

3.3.2 Wage determination

Labour-market diagram: wage on the vertical axis, number of workers on the horizontal axis, demand sloping down, supply sloping up.

Event	Curve	Direction	Wage	Employment
Product demand rises	Demand	Right	Up	Up
Product demand falls	Demand	Left	Down	Down
More qualified people	Supply	Right	Down	Up
Fewer qualified people	Supply	Left	Up	Down

Worked reminder (Country A bakers, invented). Demand 1,500 - 50 x wage and supply -300 + 100 x wage meet at wage 12 with 900 workers. A demand rise of 150 at each wage moves the equilibrium to wage 13 and 1,000 workers: wage up 8.3%, employment up 11.1%.

Minimum wage method:

1. Compare the floor with the equilibrium wage.
2. Floor below equilibrium: no effect.
3. Floor above equilibrium: read demand (fewer jobs) and supply (more seekers) at the floor. Surplus of labour = unemployment.
4. At a floor of 14: demand 800, supply 1,100, unemployment 300. Hourly wage bill 11,200 against 10,800 before.
5. Evaluate: gains for those employed against jobs lost, and cost to firms.

Relative bargaining power rises with union membership, scarce skills, employer profits and the ability to disrupt output.

3.3.3 Differences in earnings

Comparison	Main reasons for the gap
Skilled and unskilled	Training lowers supply of skilled workers; their output is more valuable so demand is high; stronger bargaining power
Primary, secondary, tertiary	Productivity, skill, numbers seeking work and demand for each sector’s output; the sectors extract resources, make goods and provide services
Male and female	Occupation and hours, career breaks, discrimination, bargaining strength, equal pay laws
Private and public	Public pay set by government and budgets; private pay follows profits; security and pensions differ

Percentage gap method: gap = (higher - lower) / higher x 100. Men 40, women 34: (40 - 34)/40 = 15%. Say clearly which pay you take as the base. Public pay 2,800 against private 3,150: public is 11.1% lower; private is 12.5% higher.

3.3.4 Division of labour

Worked reminder: six workers alone make 5 lamps a day each (30 in total). Divided into tasks they make 72. Output per worker 12, up 140%. Wage 90 a day: labour cost per lamp 18 falls to 7.5, down 58.3%.

For	Advantages	Disadvantages
Workers	Speed and skill at one task, possibly higher pay	Boredom, narrow skills, harder to change job
Firms	More output, lower unit costs, easier training	Production halts if a group is missing, lower morale
Economy	Higher output, lower prices, trade gains	Structural unemployment, dependence on few products

3.4 Trade unions

Role

• Collective bargaining on wages, working hours and working conditions.
• Protecting employment: resisting redundancy, supporting members, pushing for safety.
• Influencing government: lobbying on minimum wage, employment law and tax.

Advantages and disadvantages

Viewpoint	Advantage	Disadvantage
Workers	Higher pay, conditions, security, a voice	Fees, lost wages in strikes, jobs lost if wages too high
Firms	One negotiating partner, better communication	Higher costs, disruption, slower change
Government	Fewer disputes, view of workers’ needs	Pressure for costly policy, essential-service strikes, price pressure

Strength of a union

Stronger with: high membership share, scarce skills, a profitable firm, low unemployment, supportive laws, rising demand for the product, unity. Weaker with the opposite.

Calculations

• Pay deal: 80 staff on 400 a week, rise 5% to 420. Weekly bill 32,000 to 33,600. Yearly bill (52 weeks) 1,664,000 to 1,747,200, up 83,200.
• Real rise: about 1.05/1.04 - 1 = 0.96% if inflation is 4%.
• Strike cost to workers: 200 workers x 6 days x 80 = 96,000.
• Membership share: 360 of 600 is 60%.

Chains of reasoning to rehearse

Write these as linked steps, each one causing the next.

• Wage rise through demand: consumers buy more bread, so firms want more bakers, demand for labour shifts right, the wage and employment both rise.
• Wage rise through supply: a long training course deters entrants, supply shifts left, the wage rises but employment falls.
• Minimum wage above equilibrium: the floor raises pay, firms cut hours or jobs, more people seek work, so a surplus of labour appears, which is unemployment. Judgement: the effect is larger when firms can easily replace workers with machines.
• Union pay claim: the union threatens a strike, the firm weighs the cost of lost output against a higher wage bill, a compromise is reached, unit costs rise, and the firm may raise prices or cut staff.
• Specialisation: tasks are split, workers become quicker, output per worker rises, unit cost falls, prices can fall. Counterpoint: monotony lowers morale and one absence can stop the line.

Evaluation prompts

Use these when a question says discuss, evaluate or assess.

1. Who gains and who loses, and in the short run or the long run?
2. How large is the effect? Use figures from the data if given.
3. What does it depend on, such as how easily firms replace workers, how skilled the workers are, or how strong the union is?
4. Reach a judgement and give the reason for it in one sentence.

Second worked reminder: a fall in demand

A different market, with invented figures. Demand for factory workers is 2,000 - 100 x wage and supply is -400 + 200 x wage. Equilibrium: 300 x wage = 2,400, so the wage is 8 and employment is 1,200. A fall in demand of 300 at each wage gives 1,700 - 100 x wage. The new equilibrium is wage 7 and employment 1,000. The wage falls by 12.5% and employment by 16.7%. The labour demand curve has shifted left, so both change in the same direction.

Must-know distinctions

• Movement along a curve (wage change) against a shift of the curve (other cause).
• Nominal pay rise against real pay rise.
• Division of labour (tasks within a firm) against specialisation (focus by firms, regions and countries).
• Minimum wage below equilibrium (no effect) against above (unemployment).
• Collective bargaining (talks) against industrial action (strike).

Quick self-test

1. Name two non-wage factors in choosing a job.
2. Why is demand for labour a derived demand?
3. A wage rises from 12 to 13. Calculate the percentage rise.
4. A floor of 14 is set where the market wage is 12 and demand is 800 while supply is 1,100. State the unemployment.
5. State one reason, apart from discrimination, why average pay differs between men and women.
6. Public pay is 2,800 and private pay 3,150. By what percentage is public pay lower?
7. Workers make 36 items instead of 18 after specialising, with the same six workers. Calculate the change in output per worker.
8. State one disadvantage of division of labour for a worker.
9. Define a trade union.
10. A union has 135 members out of 300 workers. Calculate membership as a percentage.
11. Give one factor that weakens a union.

Answers

1. Any two of hours, security, conditions, promotion, training, location.
2. Firms want workers only to make products that consumers buy.
3. (13 - 12)/12 = 8.3%.
4. 1,100 - 800 = 300.
5. Different occupations, career breaks or part-time work, or bargaining strength.
6. (3,150 - 2,800)/3,150 = 11.1%.
7. From 3 to 6 per worker, up 100%.
8. Boredom, narrow skills or lower job satisfaction.
9. An organisation of workers that aims to protect and improve members’ pay and working conditions.
10. 135/300 = 45%.
11. High unemployment, low membership, plentiful substitutes, a struggling employer, or restrictive laws.

Where marks are usually lost

• Describing a minimum wage as always creating unemployment, even when set below equilibrium.
• Shifting the wrong curve, or moving along a curve when a shift is needed.
• Forgetting that firms hire labour only because buyers want the goods it makes.
• Giving only wage factors when asked about the choice of occupation.
• Using the wrong base in a percentage gap, or not saying which base is used.
• Treating a pay gap as proof of discrimination without considering hours and occupation.
• Listing union effects for workers only, not firms and government.
• Stopping after advantages when the question asks for a judgement.

Official syllabus

Cambridge IGCSE Economics 0455 syllabus for examination in 2026, version 2, published by Cambridge University Press & Assessment, sections 3.3 and 3.4.