Theory of substance This theory

Theory of substance This theory is given by Phystorte It is based on Malthus population theory. According to this theory, "Rate of wages always has tendency equal to that money which is essential to life subsistance of worker. 

In a simple wornd Rate of wages Necessary money for subsistance Theorles of Wage Detorminatilon 

2. Standard of Living Theory of Wages According to this theory the rate of wages is not equal to the subsistance butit has tendency to be equal to the living standard of worker. 

3. The Wago Fund Theory 

It was propounded by Adam Snmith, this theory is also supported by Ricardo and Malthus. According to this theory wage is dependent upon the demand and supply of labour or it is determined by the ratio of population and capital. Population means that number of worker which work for wages. 

Capital Means= Direct purchase of labour punj aseM Supply of worker Rate of wages Modern Theory of Wages The wage rate, like any price is determined by the demand for and supply of labour. Although labour has certain peculiarities and cannot be regarded as an ordinary commodity. Still their are wages which are determined by the intersection of the forces of demand and supply as in the case of an ordinary commodity. Thus, the modern theory of wages is the demand and supply theory. 

Assumptions Assuming perfect competition and absence of TV the theory is based on certain assumptions which follow thus Freedom of occupation 

1. 2. Many workers and employers in the market where no single worker or employer can influence the wage rate. Perfect mobility of labour. 3. 4. Full employment. 

5. Perfect knowledge of labour market.

Modern Theory of Wages ccording to modern theory, wage rate is determined by the equilibrium between demand and supply of labour. Price of labour is determined at the point at which demand and supply are equal) Demand of Labour Labour is demanded by producers and it is dependent upon the productivity of labour. M. Higher the productivity, more will be the demand. 

As industrialist cannot pay more than the value of marginal productivity. Therefore, value of marginal productivity of labour is the maximum limit of wage rate. Quantity of labour (

e) 614 2. Demand of labour will be more at lower wage rate and less at higher wage rate. It can be shown with the help of demand curve. 

3. Quantity of labour shown on X-axis and wage rate on Y-axis and DD is demand curve. A. 

At wage rate Pthe demand for labour is ON. When it reduces P, demand increase to ON, Thus demand of labour increase on a fall in wage rate and vice versa. Supply of Labour Supply of labour means the numbers of workers who are ready to sell their labour at different wage rent. Marginal sacrifice of worker is the minimum limit of wages that determines the supply of labour. Normally there is direct relationship between wage rate and supply of labour. Higher the wage rate more will be labour and vice versa. There is a back bend in the supply curve of labour, Le. after a certain increase in wage rate supply of labours start to decline. Workers reduce the hours of work and increase the hours of leisure. In this figure 

(b) supply curve is positive upto point "R". Supply of labour increases upto L on wage rate upto W, but beyond this point, the workers are increasing the hour of leisure by reducing the hours of work As a result supply of labour declined from Li to Lz and wage rate from W, to W2. Wage Determination For an industry, wage rate is determined at the point where demand and supply of labour are equal or in other words, demand curve intersect supply curve.