ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Criteria of a Rational Wage Policy

Criteria of a Rational Wage Policy A K Das Gupta There has been a lot of debate in recent years concerning the appropriateness of the marginal productivity theory as an explanation of the wages of labour and of wage differentials. The debate has centred on the wage-profit relationship. It is now generally agreed that the theory involves circular reasoning; that the technical condition of production being what it is, one does not know what the marginal productivity of labour is unless one knows what the rate of profit is. And it is not capital alone that is involved; we have to deal with heterogeneous sorts of labour, and this makes the problem more complicated. Further, there are enterprises whose products are not saleable: in these cases, it looks as if it is more appropriate to say that marginal productivity is derived from the price of labour than that the price of labour is derived from its marginal productivity! These logical difficulties apart, the concept of scarcity makes little sense when there is widespread unemployment of labour. In a situation like this, the concept which is relevant is just that of a minimum supply price. And so we find ourselves back to the classical world, to "cost of reproduction" and all that.

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