Wages and Salary

Introduction All human being work for the living and money. It will right to say that money is important for life, it is not just a physical need but it gives recognition, sense of accomplishment. For employee money comes in a form of salary and wages. Wages and salary are equaled important as money. To make employee work efficient they must get accurate salary and wages. Alleged wages and salary inequality lead to dissatisfaction, unrest and lower of moral. In the present time attempt is made to analyze the wages and salary so that health industrial relation can be created. Definition of wages Payment of wages Act define wages under section 2(vi) All the remuneration capable of being expressed in term of money which would payable whether on conditionally upon regular attendance, good working. It includes bones and additionally remuneration, but does not include house accommodation, contributions to provident fund, travelling allowance, any gratuity payable on discharge. Problems of wages 1. 2. 3. 4. Wages as a income for worker Wages as a cost of production Determination of wages i.e. on hourly base or monthly base Normal wages and real wages Normal wages are wages paid or received in term of money Real wages which determines the standard of living of person, and also consider purchasing power of money System of wages In this we study on what base wages should be given. It includes various combinations with a view to incorporate incentive system and motivates the worker .These System are as follow

1. Time or day wage system 2. Piece wage system 1. Time or day wage system : under this system , worker is paid a certain sum for the fixed period of time , that is so much per hour or per day or month. Advantages 1. Easy to calculate 2. Help in Quality control Disadvantages 1. Worker does not work hard as they know they will get wages for fixed period 2. The productivity will low 3. Continuously supervisor 2. Piece wage system: the worker gets wages as a fixed rate per unit production or job completed. In this rate is fixed on past performance and established of average performance of a particular standard of workmanship. Advantages 1. Worker will get more if they produce more 2. Help management in delay because less breakdown 3. No supervisor required

Disadvantages 1. With the aim to produce more worker can misuse the machines and spoil them. 2. After earning more worker will take holidays 3. Worker will ignor the quality of product and which may fall. 3. Combination of piece wage and time wage System:In this method the wage are calculated bycombinting above two method. the combination is done to over come the disadvantages of these method

Theories of wages The theories of wages are divided into three statges 1. The JUST WAGE OF Middle ages . this is the first stage wages are just the amount worker recived for their work. This stage was trace during medieval period of church domination. It is a concept rather then theory of wages 2. The classical theories of wages: IN this stage many theories were deveolp by different economists like Adam Smith ,Ricardo, karl Marx, J.s Mill, and Walker. Adam smith contribution to Wage theories: All the classical theories of wage came after the publication of Adam smith wealth of the nation in 1776 According to him any value of commodity for the person who purchase it for further exchange , is equal to the quantity of labor he used to acquired that product . He say that labour is the first price, which a person used to acquired a commodity . The important contribution by the Adam smith is to find the cause of difference in the wages of the labour . He state that there is difference in the disadvantages of various occupation ,the wages in their occupation must be differ by the amount to offset the disadvantages. This has come to be known as the principle of net advantage. The subsistence theory of Ricardo: This theory first formulated by physiocrates who seen the condition of French worker. He say that natural price of labour is that price which is necessary to enable the laborers, one with another, to subsist and perpetuate their race without either increasing of domination .(wages equal to money necessary for life only) According to this theory wage must be minimum to the amount required to maintain the subsistence level of his and his family. And wages should not be more the this subsistence level The weakness of the theory is that it ignore the productivity of labour which play important role for in determining the wages and ignore the demand of worker. This theory does not explain the forces which determine wages and rate of wages cannot be permanently below to subsistence level.

The Standard of living Theory : this theory was develop by making modification in the subsistence theory of Ricardo in late 19th century by Karl Marx . He say wages should be conform to the living standard to which the worker have habituated . According to him labour is influence by two elements 1) the Physical element and 2)historical and social Residual Claimant : this theory was given by American economist Walker . According to him wages are the residual left over after the payment of other factors of production like rent, profit and interest, and remaining goes to the worker. IF worker productivity is more residual will left more for worker. This theory fails because it consider all the factor of production have equal contribution and it also ignore the supply side of labour The wages fund theory byJ-S Mill: In his Principles of Political Economy (1848). State that wages depend upon the relationship between the supply of population and the capital available to employ the labour. Here population means available for labour and capital mean fund for paying the wages. He say wages will increase only when fund are increase or number of employee decrease. He assume that funds are fixed and wages will change with the increase or decrease in the number of labour. This theory fails because it is not possible to determine the amount of wages to be paid in advance and productive of labour has been ignore. This theory does not help in understanding the difference in the wages at different occupation

3. The neo-classical modern theory: These theory are known as modern period theory, formulated by Austrian school of economics. Following are some theory of modern period The marginal productivity theory: this theory is most accepted theory of today .this theory is given by Prof J.B.Clark who stat that wages are fixed by marginal productivity of labour of employer. This theory is based on following assumption 1. Prefect competition 2. Prefect mobility of labour 3. Homogeneous in character 4. Constant rate of interest

5. Constant rent for factor 6. Price of commodity are fixed Explanation of theory The price of the labour was determined by its marginal utility to the employer. Each unit of labour hired by the employer contributes to the value of the product but the amount contributes by successive unit is less than the preceding one . at the point where wage amount is equal to the contribution of the labour, the employer will no longer hired addition worker .the price of cannot be more than that of the last hired Thus the wages paid will equal to productivity of the last worker hired or in other word to marginal productivity of labour force This theory tries to explain not only the level of wages but also differential in wages for various grades of labour Limitation of theory 1. These theories have litter application in real world, labour cannot be easily mobile and they have heterogeneous character 2. Productivity also depend upon other factor of production 3. Lower productivity mean low wages which result in low standard of living

The bargaining Theory of wages: this theory was developed in 1933to overcome the limitation of Marginal productivity theory It is based on assumption 1. Hours, wages and work condition are the matter of bargaining of both side 2. With organization and concerted action there will be a tendency toward undesirable. 3. No adequate safe grades found in the operation of the factor at work in organized trade. 4. There is a flexible situation Explanation of theory Under a system of free competition and individual bargaining, determines the condition of employment occurs in chain of bargain linking together the manual worker the capitalist employer, the wholesale trader, the shopkeeper and the customer. The theory thus holds that wages are determined by the relative bargaining power of employers and employee