Labour and Wage Rates

to undertake - починати, братися

a commodity - товар, об'єкт торгівлі

wage - заробітна плата

a composition - склад

eligible - підходящий, прийнятний, бажаний

extension - подовження, збільшення

remuneration - оплата праці

to yield - приносити, давати

inequality - нерівність

willingness - готовність

sufficient - достатній

an employer - роботодавець

an employee - робітник, службовець

equalizing — той, що урівноважує

marginal - крайній, граничний

negotiation — переговори, обговорення умов

Labour is human effort - physical and mental which is directed to the production of goods and services. But labour is not only a factor of production, it is also the reason why economic activity takes place. The people who take part in production are also consumers, the sum of whose individual demands provides the business person with the incentive to undertake production.

It must be borne in mind that there are the з services of labour which are bought and sold, and not labour itself. The firm cannot buy and own labour in the same way that capital and land can be bought and owned. Buying and selling labour service is a convenient way to obtain the advantages of specialization and exchange. So we can say that labour service is a commodity, subject to the laws of demand and supply like any other commodity.

The supply of labour available to an economy is not the same thing as the number of people in that community. The labour supply is a measure of the number of hours of work which is offered at given wages over some given period of time. It is determined, therefore, by the number of workers and the average number of hours each worker is prepared to offer. Both of these features are subject to change and, at any moment of time, they will depend upon a number of the following things:

1. The size of the total population. As it sets an upper limit to the supply of labour.

2. The age composition of the population. It takes accounts of the proportions in the different age groups. Two countries might have the same total populations but very different age compositions and hence very different numbers in the working age groups.

3. The working population. It may be defined as the number of people who are eligible for work and offer themselves for employment.

4. The working week and holidays. The gradual reduction in the working week, accompanied by an extension of the annual holiday period, amounts to a reduction in the supply of labour.

5. .Remuneration. There is a relationship between the amount of work offered and the price paid for that work. When wage rates are relatively low, increases in wages will tend to lead to an increase in the supply of labour, but there comes a point when higher incomes make leisure more attractive. When incomes are relatively high, therefore high wage rates may reduce the amount of labour offered by the individual worker.

The demand for labour is a negative function of the wage rate paid for labour. The supply function for labour services is one in which larger amounts of labour can be obtained by offering a higher payment for more services.

Differences in wage rates, like differences in prices of various goods, reflect relative demands and supplies of various kinds of labour. Qualitative differences in people's productive talents yield differences in relative supplies of those talents and hence in the wages paid. Differences in supplies of various talents reflect inequality in amounts of various natural talents, costs of training and developing talents, and willingness of suppliers of labour to engage in various kinds of work.

Differences in monetary wages sufficient to compensate for nonmonetary features of various jobs or of personal traits of employers or employees are called equalizing differences. These differences are sometimes called discriminatory wage differences, in that they discriminate or compensate for differences in the nonmonetary attributes of the job and the employer and employees.

Much education of people for productive work is on-the-job training. Some wage differences reflect compensation for on-the-job education, since the employee is willing to pay for this by accepting a lower wage. Employees receiving specific training do not thereby receive lower-than-competitive wages; instead they receive wages larger than their current marginal productivity to the employer and later receive wages less than their marginal productivity to this one employer.

There are labour unions, which affect the structure and procedure of wage and job negotiation. Wages will be affected insofar as the supply of labour is changed by modified conditions of labour entry to the labour market. The union shops, the closed shops, strikes, control of entry to the union - all are the means to affect the labour supply conditions for employers.

QUESTIONS AND TASKS

1."Overtime premium wages are a device to restrain employers from working employees overtime". "Overtime premium wages are means whereby employers induce employees to work overtime more than they otherwise would". Which of these two propositions is correct? Explain.

2."Elizabeth Taylor was paid over $ 5.000.000 for making the film "Cleopatra". Yet Andrey Herburn could have taken her place for, say, $ 1.000.000. There must be something wrong with the movie industry. Certainly, Taylor is not worth that much more to 20^th Century-Fox than Herburn would be". Explain, using marginal-productivity theory, how it can be sensible to pay Taylor that much, even though Herburn might have been available for one fifth as much.

3. Why are the wages of the top managers of large companies generally higher than those of small companies? The answer is not that the larger companies have a greater ability to pay because they are richer (they do not pay more for their buildings or subordinate employees).