Analyse the government and market forces that create differences in income.

Government and government regulations such as enterprise bargaining combined with the interaction of the market forces of demand and supply contributes to create differences in income in a labour market. Therefore this determined the price of labour or the wage levels and the quantity of labour or employment levels. Also factors affecting supply and demand influence the income difference. The occurrence of differences in income in a labour market is due to the interaction between …

…is relatively cheaper for firms to use labour than capital, because the wage rate declined and hence causing an expansion in labour demand. Government can also create differences in income by its' use of fiscal policy through social security and welfare and the taxation systems in its annual budget. Overall, the relationship between the market forces of demand and supply, government and government regulations all contributes to create differences in income in the labour market.