Classwork Series and Exercises {Economics – SS2}: Wage Determination

Economics, SS2, Week 4

Topic: Wage Determination

Content 

1. Meaning of Wage determination
2. Factors of Wage determination

Meaning of Wage Determination

A “wage determination” is the listing of wage rates and fringe benefit rates for each classification of laborers and mechanics which the Administrator of Labor has determined to be prevailing in a given area for a particular type of construction.

It is also the process of setting wage rates or establishing wage structures in particular situations.

Wages can be determined through the following means

Factors of Wage Determination

1. The forces of demand and supply in a market economy: In a market economy, we mean a capitalism economy where every individual is allowed to participate in the production of goods and services thereby creating room for competition. In a competitive labor market there are so many employers and employees, so a single employer or employee cannot influence the wage rate. The wage rate in a competitive market can be determined by

• When the supply of labor exceeds the demand, wage rate will fall.
• When the demand for labor exceeds the supply, wage rate will rise.
• When the demand for labor equals the supply, wage rate will be favorable to both employer and employee.

2. Government activities and policies: The policy set by the government and her commissions determine the wages of labors especially in the public service. In fixing of wages the government agency or wage commission consider the following:

3. Level of productivity: The higher the level of production the higher the wage rate of workers.

4. Cost of living: The cost of living determine the wage rate, if workers spend so much to get the essentials of life, then the wage will have to increase to enable them meet up with their expenses

5. Type of occupation: wage structure vary from one occupation to another, the type of occupation will determine the wage received.

6. The activities of the trade union: A trade union is an association of workers formed to enable the members to take collective decision rather than individual decision. They take decision relating to their interest and conditions of work. Examples of trade union are National Union of Petroleum and Natural Gas Workers (NUPENG), National Union of Road Transport Workers (NURTW) National Labor Congress (NLC), Academic Staff Union of Universities (ASUU) etc.

Objectives of trade union

1. They secure employment for their members who do not have job.
2. They regulate the entry qualifications into the various professions
3. They make it their responsibility to safeguard the interest of their members.
4. They help to secure good wages for members.

Weapons that can be used by a trade union during a trade dispute.

The trade union as an association has some certain weapons they can use whenever there is a trade dispute. Some of these weapons are:

1. Strike: This is the situation where the workers stay out of work completely, it is the ultimate weapon used by most trade unions.
2. Picket lines: This is a situation where workers stays at the entrance of the factory and refuse to work.
3. Collective bargaining: This method the representative of the union and employers will meet to negotiate or deliberate on issues affecting the workers.
4. Threat to strike: This is when the workers give ultimatum to the employers that they will embark on strike if their demands are not met. It is like a threat to the employers.

Test and exercise

1. The major aim of the trade union is to (a) embarrass their employers when their needs are not met (b) to make decisions relating to their work (c) They discipline employers by fighting them (d) all of the above.
2. The process of setting wage rates or establishing wage structure in particular situations is known as (a) wage determination (b) wage consideration (c) wage implementation (d) wage allocation.
3. The weapon used by trade union where workers stays at the entrance of the factory and refuse to work is (a) strike (b) collective bargaining (c) threat to strike (d) picket lines.
4. All the following are weapons used by the trade union during a trade disputes (a) strike (b) picket lines (c) fighting and quarreling (d) collective bargaining.
5. ASSU stands for (a) All State Situation Union (b) Academic Staff Union of Universities (c) Academic Student State Union (d) All Students and Staff Unions.

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