2018-02-13
642
Your real wage, on the other hand, takes inflation into account. An increase in real wages occurs when wages rise more quickly than inflation. On the other hand, if real wages rise more slowly than inflation, then your real wages - your purchasing power - has declined. It's important for you to know your real wage to determine if an increase in your wage is actually increasing your wealth, simply keeping pace with rising costs, or worse, falling behind rising prices.
Real wage=nominal-taxes
1. Ability to Pay:
The ability of an industry to pay will influence wage rate to be paid, if the concern is running into losses, then it may not be able to pay higher wage rates. A profitable enterprise may pay more to attract good workers. During the period of prosperity, workers are paid higher wages because management wants to share the profits with labour.
2. Demand and Supply:
The labour market conditions or demand and supply forces to operate at the national and local levels and determine the wage rates. When the demand for a particular type of skilled labour is more and supply is less than the wages will be more. One the other hand, if supply is more demand on the other hand, is less then persons will be available at lower wage rates also.
According to Mescon,” the supply and demand compensation criterion is very closely related to the prevailing pay comparable wage and on-going wage concepts since, in essence to all these remuneration standards are determined by immediate market forces and factors.
3. Prevailing Market Rates:
No enterprise can ignore prevailing wage rates. The wage rates paid in the industry or other concerns at the same place will form a base for fixing wage rates. If a unit or concern pays low rates then workers leave their jobs whenever they get a job somewhere else. It will not be possible to retain good workers for long periods.
4. Cost of Living:
In many industries wages are linked to enterprise cost of living which ensures a fair wages to workers. The wage rates are directly influenced by cost of living of a place. The workers will accept a wage which may ensure them a minimum standard of living.
Wages will also be adjusted according to price index number. The increase in price index will erode the purchasing power of workers and they will demand higher wages. When the prices are stable, then frequent wage increases may not be required
5. Bargaining of Trade Unions:
The wage rates are also influenced by the bargaining power of trade unions. Stronger the trade union, higher will be the wage rates. The strength of a trade union is judged by its membership, financial position and type of leadership.
6. Productivity:
Productivity is the contribution of the workers in order to increase output. It also measures the contribution of other factors of production like machines, materials, and management.Wage increase is sometimes associated with increase in productivity. Workers may also be offered additional bonus, etc., if productivity increases beyond a certain level. It is common practice to issue productivity bonus in industrial units.
7. Government Regulations:
To improve the working conditions of workers, government may pass a legislation for fixing minimum wages of workers. This may ensure them, a minimum level of living. In under developed countries bargaining power of labour is weak and employers try to exploit workers by paying them low wages. In India, Minimum Wages Act, 1948 was passed empower government to fix minimum wages of workers. Similarly, many other important legislation passed by government help to improve the wage structure.
8. Cost of Training:
In determining, the wages of the workers, in different occupations, allowances must be made for all the exercises incurred on training and time devoted for it.
