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Wages

Wages differ between persons, between occupation (jobs), between firms, between industries and between nations. Such wages (and salary) different can be explained by a host of factors such as entry level qualifications, explained by a host of factors such a sentry level qualification, experience and skill requirement, scarcity of specific factor, pleasantness of the job, risks involved on this the job and so on. Certain basis concepts of wages and related payments must be noted to understand the entire “Compensation packages” of an employee:

1. Subsistence wages,

2. Fair wages,

3. Minimum wages,

4. Real wages vs. Money wages

5. Time wages vs. Piece wages,

6. Fringe benefits (Pay vs. Perks),

7. Allowances like HRA, CCA, DA,

8. Bonus (i.e., deferred payments)and

9. Gratuity, pension, medical reimbursement, etc.

The basic point to note is that all these constituents of compensation package for an employee are jointly or singly determined by the interplay of forces of market demand and supply. From time to time, different economists have emphasized different factors leaning on demand and supply only.

Traditionally, the economists treated wages as “subsistence payments” to labour to sustain them on production process. Some treated the wages as just “residual payments” after meeting all production costs and entrepreneurial remuneration called ‘profit.’

The wages and/or salary package including managerial compensation is determined though collective bargaining, which is essentially a tug of war between demand and supply forces in the labour market.