Notes And Study Material for Exam Papers

We have studied various theories which explain the determination of wages but they all stand discredited as they do not offer satisfactory explanation of wages. The modern economists are of the opinion that just as the price of a commodity is determined by the interaction of the forces of demand and supply, the rate of wages cal also be determined in the same way with the help of usual demand and supply analysis. Let us now discuss in brief as to what we mean by demand and supply of labour. 1) Demand for Labour: There are various factors which influence the demand for labour. These factors in brief are as under. (a) Demand for labour is derived demand: Demand for labour is not a direct demand. It is derived from the demand for the commodities and services, it helps to produce. If the demand for a product is high in the market, the demand for labour producing that particular commodity will also be high. In case the demand for commodity is small the demand for that labour w...

Nominal Wage: By nominal wage is meant the total amount of money earned by a person during a certain period. For instance one employs a servant and pays him Rs. 2600 per month for the services he renders to him. The amount which is paid in terms of money only is named as normal wages. Real Wages: Real wages refer to the total amount of satisfaction which a worker receives in the form of necessities, comforts and luxuries in return for the services. Real wages generally include money wages and other facilities like free clothing, free housing, free accommodation, free electricity etc. If we are to judge the standard of living of the masses it can be estimated not from the nominal wages of the workers but from the real wages. In other words of Adam Smith, the labour is rich or poor, is well or ill rewarded in proportion to the real not nominal wages of the labour. Factors for Determining Real Wages If we are to determine the real wages of a labour the following fact...