How are Wages Determined

As you can see in Table 9-4, wages can vary enor­mously from one job category to another.

Wages differ from one job to another partly because of the laws of supply and demand or market forces. Wages and salaries are the price of workers, and people trained, qualified, and interested in performing a particular job are the supply. You can deter­mine the equilibrium wage or salary for many jobs in the same way you found the equilibrium price for T-shirts.

How Market Forces Affect Wages. Some of the nation's wealthiest wage earners are successful rock singers and musicians. By comparison, even the most successful classical musicians earn a fraction of their rock counterparts. How would you account for this difference? If you said it had to do with the demand for rock music compared to classical music, you would be absolutely correct. We can illustrate this in the following graphs:

In summary, when the demand for a particular type of worker is high compared to the available supply, wages tend to be high. When the supply of workers in a particular job category is high compared to the quantity demanded, wages tend to be low.

Date: 2015-02-28; view: 1046