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Related to wage rate: Minimum Wage Rate, Minimum wages
wage ratethe money payment made to a worker for each ‘unit’ of his or her labour input, usually measured either on hourly time basis (see WAGES), or for each unit of output produced (see PIECEWORK). See PAY, PAYMENT BY TIME, PAYMENT BY RESULTS, WORK STUDY.
wage ratethe PRICE of LABOUR. In a competitive LABOUR MARKET, the wage rate is determined by the demand for, and supply of, labour. The demand curve for labour as a factor input is downward-sloping (D in Fig. 196), reflecting a fall in the marginal productivity of labour as more labour is used. The position and slope of the demand curve for a particular type of labour will depend upon the productivity of the workers concerned and the demand for, and PRICE ELASTICITY OF DEMAND for, the product that they make (see MARGINAL-PHYSICAL PRODUCT and MARGINAL-REVENUE PRODUCT). The supply curve (S) for labour is upward-sloping: the higher the wage rate, the greater the amount of labour offered.The position and slope of the supply curve for labour will depend upon the skills of the particular workers concerned and their occupational and geographic mobility. The equilibrium wage rate is We, where the two curves intersect.
In practice, supply and demand forces in the labour market are likely to be influenced by the bargaining power of TRADE UNIONS (see COLLECTIVE BARGAINING), which can affect the supply of labour, and, likewise, powerful employers and employers’ associations, which can affect the demand for labour, government labour market policies, such as MINIMUM WAGE RATE legislation and the stipulation of maximum hours of work, and government macroeconomic policies, such as PRICES AND INCOMES POLICY. For example, if monopoly trade union suppliers of labour or government minimum wage rate legislation were to establish a wage rate such as Wm in Fig. 196, then the effect would be to create UNEMPLOYMENT equal to Q1Q2. (See UNEMPLOYMENT for further discussion, especially ‘voluntary’ unemployment at the ‘going‘wage rate.)