Quick Answer: What Are The 3 Theories Of Wage Determination?

What determines the minimum wage?

Minimum wage rates are determined by factors such as poverty threshold, prevailing wage rates as determined by the Labor Force Survey, and socio-economic indicators (i.e.

inflation, employment figures, Gross Regional Domestic Product, among others), which insures better workers protection..

What are the factors which determine how much an employer pays his employees?

Factors Affecting Employee Compensation – External and Internal Determinants of CompensationLabour Market Conditions: ADVERTISEMENTS: … Economic Conditions: … Prevailing Wage Level: … Government Control: … Cost of Living: … Union’s Influence: … Globalization: … Cross Sector Mobility:

What are the theories of wage determination?

The Subsistence Theory of Wages: According to them wages would be equal to the amount just sufficient for subsistence. Lassale, a German economist developed this theory. According to this theory, wages are determined by the cost of production of labour or subsistence level. The wages so determined will remain fixed.

What is wage fund theory?

wage theory The wage-fund theory held that wages depended on the relative amounts of capital available for the payment of workers and the size of the labour force. Wages increase only with an increase in capital or a decrease in the number of workers.

How wages are determined?

Just as in any market, the price of labor, the wage rate, is determined by the intersection of supply and demand. When the supply of labor increases the equilibrium price falls, and when the demand for labor increases the equilibrium price rises.

What are the two theories of wages?

Some of the most important theories of wages are as follows: 1. Wages Fund Theory 2. Subsistence Theory 3. The Surplus Value Theory of Wages 4.

What is classical wage theory?

Generally, the prices of factors are determined by the interaction of demand and supply, which should also be applicable in determining the wages for labor. … However, the theory of demand and supply is not fully applicable while determining wages for labor.

Who determines state minimum wage?

The minimum wage in the United States is set by U.S. labor law and a range of state and local laws. Employers generally have to pay workers the highest minimum wage prescribed by federal, state, and local law. Since July 24, 2009, the federal minimum wage is $7.25 per hour.

Who is the pioneer of the wage fund theory?

John Stuart Mill’s Principles of Political Economy, published in 1848, provides the definitive treatment of Wage-Fund Doctrine. Mill’s solution to increasing the wage rate above subsistence level is to control the growth of the population. If population grew faster than the growth of capital, wages would fall.

How are competitive wages determined?

In a competitive labor market, the equilibrium wage and employment level are determined where the market demand for labor equals the market supply of labor. Like all equilibrium prices, the market wage rate is determined through the interaction of supply and demand in the labor market.

What four factors cause wages to differ?

Why do wage rates differ? The rate of pay for a specific job, Determined by 4 factors: Human capital, working conditions, discrimination, and government actions.

What are the determination of wages?

Classical economists argue that wages—the price of labor—are determined (like all prices) by supply and demand. They call this the market theory of wage determination. When workers sell their labor, the price they can charge is influenced by several factors on the supply side and several factors on the demand side.

What is nominal wage?

Nominal Wage Rate and Real Wage Rate The nominal wage rate is the average hourly wage rate measured in current dollars and the real wage rate is the average hourly wage rate measured in dollars of a given reference base year. … The real wage rate is the quantity of goods and services that an hour’s work can buy.

What is subsistence wage theory?

The subsistence theory of wages, advanced by David Ricardo and other classical economists, was based on the population theory of Thomas Malthus. It held that the market price of labour would always tend toward the minimum required for subsistence.

What is a base wage?

Base pay is the initial salary paid to an employee, not including benefits, bonuses, or raises. It is the rate of compensation an employee receives in exchange for services. An employee’s base pay can be expressed as an hourly rate or as a weekly, monthly, or annual salary.

What are different types of wages?

5 Wage Types and How They Affect Your EmployeesMinimum Wage. Minimum wage is the most widely recognized term in the realm of employee compensation. … Living Wage. Living wage is the lowest wage at which the wage earner and his/her family can afford the most basic costs of living. … Prevailing Wage. … Tipped Wage. … Fair Wage.

What are the three factors that determine a person’s wage?

Following factors influence the determination of wage rate:Ability to Pay:Demand and Supply:Prevailing Market Rates:Cost of Living:Bargaining of Trade Unions:Productivity:Government Regulations:Cost of Training:

What is a wage rate example?

Explained simply, wage rates are based on the amount produced or the number of hours worked. Sales staff, for example, are given a commission based on the number of sales they make. Conversely, hourly employees are paid a certain amount for each hour they spend at work.