WAGES…

Presented By Sanjana Neelkar

 Wages
Meaning : Price paid for the use of labour is called wages. Labour refers to
all those mental and physical activities which are undertaken to earn income.
If a labourer is paid wages for his services on the basis of the time period,
then it is called ‘Time wages’. On the other hand, if wages are paid on the
basis of number of units produced, irrespective of the time involved, then it
is called ‘Piece wage’.
 Definitions Of Wages:
 According to prof. Benham, “ A wage may be defined as a sum of a money
paid under contract by an employer to a worker for services rendered.”
 According to prof. Mc Conell , “wages or wage rate are the prices paid for
the use of labour.”
 Wage is termed as a compensation that is given on the basis of the amount of
work done and the hours spent in doing that. Wages are variable and do vary
with day to day functioning of an indivisual .
 Wages are given to labour who are engaged in manufacturing processes and
get the compensation on a daily basis
 Types Of Wages :

Piece Wage : piece wages are the wages paid according to the workdone by the
worker . To calculate the piece wages , the number of units produced by the workers
are taken under consideration.
Time wages : If the labour is paid for his services according to time, it is called as
time wages.
Cash wages : Cash wages refers to the wages paid to the labour in terms of money .
The salary paid to a worker is an instance of cash wages.
Wages in kind : When the labour is paid in terms of goods rather
than cash, is called the wage in kind . These types of wages are
popular in rural areas.
Contract wages : Under this, the wages are fixed in the beginning for
complete work. For instance, if a contractor is told that he will be paid
Rs. 25,000 for the construction of building, it will be termed as
contract wages.
 Theories of wages:
Subsistence Theory
Wage Fund Theory
Surplus Value Theory
Residual Claimant Theory
Marginal Productivity Theory
Bargaining Theory
 Subsistance Theory :
According to this theory, wages of a worker in the long run are determined at that
level of wages which is just sufficient to meet the necessaries of life. This level is
called subsistence level.
If workers are paid higher wages than the subsistence level, the workers would be
better off and they will have large families. Hence, their population would increases,
the supply of labor would increase and therefore, wages will come down.
If wages are lower than the subsistence lavel, there would be a reduction in
population and thereby the supply of labour falls and wages increase to the
subsistence level.
 Wage Fund Theory :

A part of the capital is kept aside for the soul purpose of wages and the determinant
is the population to calculate the wages. This is fixed and constant. This is called as
wages fund. Wage is determined by the amount of wages fund and the total number
of labours .
[Wage rate= wage fund/number of labour]
An increase in wage rate is possible only by an increase in wage fund or by a
reduction in the number of labours.
 Surplus Value Theory :
This theory is based on the basic assumption that like other article, labor is also an
article which could be purchased on payment of its price i.e. wages.
This payment , according to karl Marx, is at subsistence level which is less than in
proportion to time labor takes to produce items. The surplus, according to him, goes to
the owner. Karl Marx is well know for his avocation in the favour of labour.
According to Marx, labour is an article or commodity which can be purchased on
payment of a price. The price of any product is determined by the time and effort
needed to produce it.
The labour is not paid in proportion to the time spent and the surplus goes to the
management to meet other expenses.
 Residual Claimant Theory :
This theory states that the wages of a worker are equal to the product minus rent,
profit and interest.
Walker views that once all other three factors are rewarded what remains left is paid
as wages to workers. Thus, according to this theory, worker is the residual claimant.
It is possible to increase wages by increasing the total product by improving the
efficiency of the workers.
This theory is criticized because the entrepreneur is the residual claimant . There is
no discussion about the influence of labour union on wage determination.
 Marginal Productivity Theory :
According to this theory , wages is determined based on the production contributed
by the last worker , i.e. marginal worker. His/her producing is called “Marginal
production”.
This theory state that ,under the condition of perfect competition , every worker of
same scale and efficiency in a given category will receive a wage equal to value of
the marginal product of that type of labour .
This theory is most practical and provides that an employer can only employ
workers up to a mark where he is able to pay the wages for productivity. Thus ,
productivity is given importance.
 Bargaining Theory :
The workers and the employers negotiate to determine the wages and the
hours of work.
As per this theory , the upper and lower limit of the wage rate is fixed and
the actual wage rates depend on the bargining power of both the employer
and the worker.
The upper limit is the rate above which the employer will upstand from
hiring a certain group of workers, whereas the lower limit is the rate below
which workers refuse to work.
Thank you!