Wages differential

Wages are payment made to labor monthly, weekly, or sometimes fortnightly for services rendered. Wages that every people get are not the same. There are four main factors that affecting wages Firstly, the demand side affects the difference in wages because, when the demand for the worker is high, then it can increase the wages rate, as the supply cannot increase immediately. The marginal revenue product primarily determines the demand side for labor. It can be defined as the addition to revenue by hiring one extra worker. If the workers are highly productive, then the demand for that worker is high; therefore, it will increase its minimum wages rate. Secondly the supply side affect the wages differential, when the supply is elastic then the wages rate will decrease, in other hand when the supply is inelastic than the wages rate will increase. The supply if labor affected by the educational qualification, the more qualified the greater the reward. Training and skill are also involved in determining wages, the more skilled the higher the wages. Next is innate ability, usually people in cultural activity. The natures of job are also affecting, when the job is risky, they would be paid higher. Trade union is the third factor that affect wages differential. Trade unions affect both demand and supply side. Trade union can influenced supply by increasing or decreasing the minimum working age or retirement age, shorten or longer the working hour, increase or decrease the minimum educational qualification, and used shop policy. It can also influence the demand side by increasing or decreasing sales or labor productivity. Lastly, is the government legislation, government set a minimum wages to ensure that the worker get a decent wages to maintain their standard of living. There are several factors that determined wages both economic and social factors. However, it is very difficult to really pinpoint the main cause of wages differential; they are interrelated to one another.