Wage Theories

Wage theories explain how workers' pay is determined. Classical theories suggest wages are set by the value of a worker’s productivity and the supply and demand for labor. The human capital theory states wages reflect the skills and education a worker has acquired. The bargaining theory emphasizes the power dynamics between employers and employees, where wages depend on negotiating strength. Additionally, some theories consider wages as a means to motivate workers or as a reflection of fairness. Overall, wages are influenced by productivity, skills, economic conditions, and social factors.