The document discusses various theories of wages, including subsistence, wage fund, purchasing power parity, and marginal productivity theories, among others. It highlights factors influencing wage variation such as regional, time, and industrial differences. The document also emphasizes the relationship between wages and productivity, as well as the role of negotiations between employers and unions in wage determination.
The document discusses various theories of wages, including subsistence, wage fund, purchasing power parity, and marginal productivity theories, among others. It highlights factors influencing wage variation such as regional, time, and industrial differences. The document also emphasizes the relationship between wages and productivity, as well as the role of negotiations between employers and unions in wage determination.
The document discusses various theories of wages, including subsistence, wage fund, purchasing power parity, and marginal productivity theories, among others. It highlights factors influencing wage variation such as regional, time, and industrial differences. The document also emphasizes the relationship between wages and productivity, as well as the role of negotiations between employers and unions in wage determination.
The document discusses various theories of wages, including subsistence, wage fund, purchasing power parity, and marginal productivity theories, among others. It highlights factors influencing wage variation such as regional, time, and industrial differences. The document also emphasizes the relationship between wages and productivity, as well as the role of negotiations between employers and unions in wage determination.
14: Theories Productivity Wages • the ratio of the output • monetary compensation volume to the input • employer to an employee volume of the unit. in exchange for work done; • utilisation of the input • calculated as a fixed processes and assuring amount for each task that the output received completed (a task wage or piece rate), or at an hourly is maximum or daily rate (wage labour) Wage Variation / Varieties Regional Variation • difficult regions for the same work in the same industry • demand and supply of the workers, cost of living index, standard of living and economic development
Time Variation • inflationary pressures the wage rates are high, whereas in slump period may be low.
Industrial Variation • Various factors such as nature of work, demand and supply of skilled labour, place of industry in the national economy and working conditions in the industry etc. Theories of Wages
03. Purchasing 04. Residual
01. Subsistence 02. Wage fund Power Parity Claimant Theory of Theory of Wages Theory Theory Wages
05. Marginal 06. Bargaining 07. Efficiency Wage 08. Demand and Productivity Theory of Wages Theory/Hypothesis Supply Theory Theory of Wages 01. Subsistence Theory of Wages
Proposed by David Ricardo
• the Iron Law of Wages or the Brazen law of Wages • payment that is just sufficient to satisfy the necessities of life • Equal to the mount of commodities necessary for the existence of a worker and his/her family • If wages rise = workers are encouraged to marry and have large families • If Wages falls= marriages and births are discouraged and impoverishment would increase death rate. 02. Wage fund Theory
proposed by J. S. Mill • wages depend upon two quantities, namely, the fixed wage fund (or circulating capital) set aside for the purchase of labour and the number of workers seeking employment. • Since the wage fund is fixed, only a reduction in the number of workers could raise wages • if trade unions of workers succeeded in raising wages in one trade that could only be possible at the expense of another. • applicable at best in an under-developed country 03. Purchasing Power Parity Theory
proposed by Keynes • determination of wage rate from a macro viewpoint- income for the wage earners. • Low wages > Low purchasing power of worker> Low aggregate demand> Low level of employment and output= unemployment and depression 04. Residual Claimant Theory of Wages
Propounded by Prof. Walker
• wages of a worker are equal to
the product minus rent, profit and interest 05. Marginal Productivity Theory of Wages
developed by J.B. Clark.
• wages of a worker are dependent upon the productivity of the worker. • Law of Diminishing Marginal Utility, the marginal product will fall and thus the labour is employed up to a level where wages is equal to a marginal level. • an employer can only employ workers up to a mark where he is able to pay the wages for productivity 07. Efficiency Wage Theory/Hypothesis
developed by Alfred Marshall • value of a worker may depend on how much he/she is paid, because richer workers are more productive or better motivated to avoid unemployment. 06. Bargaining Theory of Wages
Proposed by John Davidson • negotiations between employers and unions • labour and employer, have conflicting objectives 08. Demand and Supply Theory
Proposed by John Davidson • Factors that determine the demand for labour include derived demand, elasticity of demand for labour and technical progress.
Wage determination Next Lecture 15- Payment of Wages Act, 1936
