Explain the main factors, which determine the wage rate in a competitive Labour Market.

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Q. Explain the main factors, which determine the wage rate in a competitive Labour Market.

Wages refers to the total package, cash plus benefits, given as a reward per time period to anyone who is employed by someone else. This encloses everyone from Doctors right down the line to waste disposal persons. Wage differentials or differences may therefore be much wider than a comparison of pay rates may suggest. Wages or net rewards from employment per time period, are a reward paid to the factor of production, labour. They are the price to secure quantity of labour (hours worked). There are two elements to the price of labour, the price of one kind of labour relative to another e.g. postman with respects to a clerk, and there is the real price of labour (if wages have gone up 10% compared to some earlier period but inflation has only gone up by 3% then real wages have increased relative to that base period)

A person’s wages can be known as their income. Income is the amount of money received by a household over a period of time. This income may come from employment, self-employment, dividends, rent or a variety of other sources Income distribution is the way in which total income is shared out between households. Not everyone receives the same amount of money each year because of wage differences and the uneven ownership of wealth

Methods of Payment

Workers sell their labour to employers in return for:

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  • Salaries. Usually salaries are paid monthly to non-manual workers such as managers irrespective of the number of hours worked.
  • Wages. Wages are weekly payments for work done and are paid by:
  1. Piece rate or piecework: an amount for every item made.
  2. Time rate: an amount for every hour worked.

Deductions

The gross wage is made up of basic wages plus overtime and bonus payments. Deducting income tax and national insurance contributions leaves net wages or take-home pay.

Money and Real Wages

Money wages refers to pay without any adjustment ...

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