Wages and Income Distribution – Basic 6 Social Studies Lesson Note (First Term)

Wages are the payment workers receive for their labour, usually calculated per hour, day, week or month.

Behavioural objectives

By the end of the lesson, pupils should be able to:

1. Define wages, salary, income and income distribution.
2. Explain the relationship between income and standard of living.
3. State factors that determine wages and causes of wage increase.
4. Name and explain the aspects of income management.
5. Apply the principles of good money management to a simple budget.

What are wages, salary and income?

Income is all the money a person receives from different sources.

• Wages: payment for labour, calculated per hour, day, week or month, as for a bricklayer or a market porter.
• Salary: a fixed payment, usually made monthly, as for a teacher or a bank clerk.
• Income: all money received from wages, salary, business, rent and investments.

What is income distribution?

Income distribution is the way the total income of a country or organisation is shared among its people.

What are the types of income distribution?

There are two types of income distribution: equal and unequal.

• Equal distribution: everyone receives the same amount, which is very rare.
• Unequal distribution: some people earn much more than others, which is common.

How is income distributed in Nigeria?

• Wide gap: there is a large gap between the rich and the poor.
• Few rich: only a few people are very rich.
• Many poor: many people are very poor.
• Middle class: the middle class is small.

What is the relationship between income and standard of living?

Standard of living is the level of wealth, comfort, goods and necessities available to a person or community. A higher income usually gives a higher standard of living.

What factors determine wages and income?

Ten main factors determine how much a worker earns.

1. Education and skills: higher education and special skills earn higher pay, and certificates matter.
2. Type of job: professional jobs pay more, skilled labour pays better than unskilled labour, and dangerous jobs may pay more.
3. Experience: more years of work bring higher pay, and senior positions are better paid.
4. Location: urban areas usually pay more than rural areas, for example Lagos compared with a small town. The cost of living also affects wages.
5. Type of employer: government, private companies, large firms, small businesses and international companies pay differently. International companies often pay more.
6. Demand and supply: scarce skills pay more. Many workers for few jobs lowers wages.
7. Economic conditions: a good economy gives better wages. A recession gives lower or unchanged wages. Inflation reduces what wages can buy.
8. Union strength: strong trade unions bargain together for better pay and may threaten to strike.
9. Minimum wage laws: the government sets the lowest pay allowed, which protects workers.
10. Performance: productive workers may earn bonuses, and commission-based jobs pay by results.

What causes wages to increase?

Wages increase when workers, employers or the government act in response to changes in prices, output or labour supply.

1. Inflation: a general rise in prices increases the cost of living, so workers ask for more money.
2. Improved productivity: workers produce more, so employers reward their efficiency.
3. Higher profits: a business that is doing well can afford to share its success with workers.
4. Trade union pressure: unions use negotiations, collective demands and the threat of strikes.
5. Government policy: a new minimum wage, economic reforms and labour laws can raise pay.
6. Shortage of workers: employers compete for qualified people by offering higher wages.
7. Promotion: a worker moves to a higher position with more responsibility and better pay.
8. Additional qualifications: further education, new certificates and professional training raise a worker’s value.

What is the minimum wage?

The minimum wage is the lowest pay an employer is allowed by law to give a worker.

• Who sets it: the government.
• Purpose: it protects workers from very low pay.
• Nigeria: the national minimum wage was raised from ₦30,000 to ₦70,000 in 2024.

What is income management?

Income management is planning how to use money wisely. It has five aspects.

1. Household needs

• Food: the most important need.
• Shelter: rent or housing.
• Clothing: basic wear for all members.
• Utilities: electricity and water.
• Healthcare: medicine and hospital bills.
• Transportation: fares to work and school.
• Education: fees, books and uniforms.

How do you make a budget?

A budget is a plan for how money will be spent over a period.

1. Write down the total income for the month.
2. List all expenses, starting with the essentials.
3. Set aside money for savings.
4. Track spending during the month.
5. Cut out waste and adjust the plan.

2. Savings

Saving means putting money aside regularly for later use.

• Emergency fund: money kept for sudden problems.
• Future goals: money for school fees, a house or a business.
• Financial security: less worry when income stops.
• Tip: save at least 10% of income, use a bank account and keep the money for emergencies.

3. Investments

Investing means using money to make more money over time.

• Stocks and bonds: shares in companies and loans to government or firms.
• Real estate: buying land or houses.
• Business ventures: starting or joining a business.
• Agriculture: farming for sale.
• Benefits: passive income, wealth building and future security.

4. Charity

Charity is giving part of your income to help others.

• Help the poor: food, clothes or money for people in need.
• Religious giving: support for mosques, churches and other institutions.
• Community support: joint projects and help for neighbours.
• Islam: Zakat, which is 2.5% of qualifying wealth.
• Christianity: tithe, which is 10% of income.
• Traditional belief: community support for members in need.

5. Reserves

Reserves are extra money kept for unexpected expenses.

• Medical emergencies: sudden illness or accident.
• Job loss: money to live on until new work is found.
• Repairs: a broken roof, car or appliance.
• Opportunities: money ready for a good business chance.

What are the principles of good money management?

There are five principles of good money management.

1. Live within your means: do not spend more than you earn, avoid unnecessary debt and be content.
2. Prioritise: put needs before wants and essentials before luxuries.
3. Plan ahead: make a monthly budget, set annual goals and think long term.
4. Avoid waste: do not buy what you do not need, and look after what you own.
5. Increase income: develop skills, start a side business, invest and build more than one source of income.

Evaluation

1. What is the relationship between income and standard of living?
2. List three factors that determine wages.
3. State three causes of wage increase.
4. Name the five aspects of income management.
5. What percentage of income should you save at least?

Multiple choice questions

1. Wages are ________
   a) Free money
   b) Payment for work
   c) Loans
   d) Gifts
2. High income leads to ________
   a) Poverty
   b) High standard of living
   c) Suffering
   d) Nothing
3. A factor determining wages is ________
   a) Hair colour
   b) Education and skills
   c) Height
   d) Age only
4. You should save at least ________ of income.
   a) 0%
   b) 10%
   c) 100%
   d) 50%
5. Income management includes ________
   a) Wasting money
   b) Household needs, savings, investment
   c) Only spending
   d) Borrowing only

Answers: 1.b 2.b 3.b 4.b 5.b

Assignment

Create a simple monthly budget for a family earning ₦100,000. Show household needs, savings, charity and reserves.