The Marginal Productivity Theory of Wages in Explaining how Wages are Determined

Evaluate the usefulness of marginal productivity wage theory in explaining how wages are determined. Many theories have been proposed to explain the nature of wages. The first is the theory of survival of wages, also known as the "iron wage law". There, David Ricardo is one of the main indicators. The theory thinks that wages are concentrated on the self-sufficiency level of workers. The wage rate is much higher than the self-sufficiency level, resulting in an increase in the number of workers and then competition will set wages back to self-sufficiency costs.

To illustrate this situation, I will explain how to adjust the economic theory of wage determination in perfect competition. Candidates should recognize the need to decide wages and supplies in their discussions. Improvement of competition theory (using marginal income productivity) can be adapted to include institutional elements - governments and unions. 4 Thoroughly analyze theoretical wage decisions (using marginal profitability productivity) and clearly focus on how the theories adapt to reflect union and government policy roles and conclusions . (Institutional factors and government policies, only supply and demand method 14 - 17)

Wage is a remuneration for labor. Wages are determined by supply and demand. Because labor is productive, labor demand arises. "Wages are often equal to the net production of labor, marginal productivity determines its demand price; while wages are closely related to maintenance of child rearing, training and efficient labor energy costs, but indirect and complex Marshall trying to maintain relationships tried to combine the marginal productivity theory of relative wage and Malthus's survival theory of average wage level.The ability to manage labor supply varies from market to market.The decision of labor supply is , Is at the level of marginal utility of labor equal to the marginal utility of labor.

According to economic theory, wages of workers are equal to marginal income products of labor force. If the employee's productivity is very high, its marginal income will be high. Production volume will increase greatly in 1 hour work. Therefore, highly efficient employees should have higher wages than low-efficiency employees. Imagine if this is not the case. The company decided to pay salaries to highly productive workers, not the minimum income of their labor force. Any other company can benefit from attracting productive employees to their company by providing higher salaries and workers' wages will rise. Therefore, in theory, there is a direct relationship between the ability to perform jobs and remuneration.