Wages In Its

Wages In Its

Wages, in its broadest economic sense, the reward of the factor of production labour (including all income from employment, income from self-employment, fees and so on); in a narrower economic sense, only income from employment the remuneration of operatives and the salaries of staff workers; popularly, the amount paid to operatives, and thus different from salaries (but mainly in the timing or form of payment salaries are paid monthly, wages weekly and the difference is unimportant in economic analysis).

The basic wage or wage-rate is distinguished from earnings, or the total amount of money paid; there is often a large difference, called 'wage-drift', accounted for mainly by overtime payments (now common in many jobs), bonuses, etc. Since World War II many workers have often earned 50 to ioo per cent more than the basic wage. Much confusion about wage negotiations and comparisons of the attractiveness of various jobs has been caused by a failure to distinguish between wage-rates and earnings.

In economic theory, the wage in its broad sense (the real reward of human effort in general) is simply the price of labour, and like other prices it is determined in the long run by the interaction of supply and demand. The demand for labour is a 'derived demand': labour is demanded not for itself but because it can produce goods which people wish to buy. The demand for labour therefore depends on the demand for the product it will help to make, on the productivity or efficiency of labour, and, not least, on the wage itself, since the number of workers an employer will hire is influenced by how much he has to pay them. The equilibrium wage for a given type of labour will be that which generates sufficient demand to clear the 'market' of the supplies forthcoming.

The pattern of relative wages in different employments is also determined by supply and demand. The wages pattern in theory is such as to equalize the supply of and demand for labour in competing employments. In each sector of the labour market, wages will tend, unless prevented, to rise or fall until an equilibrium of supply and demand is reached.

Further reading Economic - Urban Economics


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