The Influence Of Job Incentives In Organizations Operation (A Case Study Of Nigeria Bottling Company Plc Ninth Mile, Enugu State)
There has been an eminent question on the part of most writer of industrial organization to study and find solution to some problem on the productivity of workers, how it can be measured and what factors influence the workers performance in the organization operation.
However in this study it is a discussion on how incentives influence an organization operation. This leading to greater productivity as a result of workers performance labour, is know to be one of the major factors of production and dry production process will be incomplete without labour as a major determinant and this are human beings whose services are purpose which include production of good and services.
A good organization operation will be determined by its productivity level which is the amount of good and services produced by certain number of labour forces and the resource available at the organization disposal; this is generally accepted fact that without compensation in return (incentive) labour will be unfunction incentive is the payment or benefit made to or received by a worker either week monthly periodically or quterly as suitable to organization in exchange for work and services reddened in the process of production.
Incentive comprises of salaries overtime payment job security provision of amenities etc which shall all be discuss later in other chapter. The has been persistent controversy over the importance of these incentives to works.
Economic and many industrial executive are prone to stress the importance of incentives in determining the worker job satisfaction and preference level which leads to high productivity and good organization operation.
During the part two decades, the question for better ways of motivating people at work has caused some researchers to concentrate on the physiological factors that stimulate workers rather than developing the incentives of financial rewards. The choice between financial reward s. the choice between financial incentives and physiological incentives has been the subject of contrivers . Both sides of those arguments are discussed in later chapter of the work.
However, there has not been any comprehensive sheme to satisfy al situations and motivations of works varies with the type of work and even with the particular Job but any form of motivation will not have the same appeal for individual workers to mere employment of working Job incentives can now be seen a very important factor in encouraging and enhancing workers performance and efficient organizations operation through not without putting the following into consideration.
- Satisfaction of workers which is suitable ways and salaries for children, better medical facilities transportation facilities, moderate working hours and a peaceful and cornfortable reticent, just to mention all but a few- To increase their commitment to work and enhance their performance work.
- Provision of adequate quantity of goods and service on which people can spend their money, whatever the level of ways paid to workers, Unless there is a steady and abundant supply of essential commodities there can be no end to demand for ways increase.
- The existence of labour relation of workers union whose prime responsibility is to maximize both economic and social well being of its members will go a long way in increasing workers productivity through provision of some incentives.
1.1 Background Of Study
The history of ways and salaries in Nigeria is traceable to the colonial period when effort were made to review workers salaries, but emphasis will be laid on the past colonial and independence era in this study.
In 1971, Adebo salaries and wages review commission was set up to emphasis on the importance of productivity estimate for income policy.
1.2 Statement Of Problem
The problem of what motivates workers into improving their work performance for an efficient organizations operation is usually qualified for sociological study and analysis. Due to difference in personality traits while industrial organization differ in size, wealth, and organizational system of operation as well a their been located in different places. It cannot be said that one particular type of job incentives will satisfy all situation or satisfy all workers at the same time. Therefore it is almost impossible to seen industrial organization in the developed countries like Britain or America using the same method of administrations and believes. With Nigeria which is still a developing nation and lack a good technological know-how. Difference could also be climate condition of these countries when compared with Nigeria.
1.3 Purpose Of Study
In spite of the popular believe that most people of the top of organization hierachy8 tend to be more committed and productive, it cannot be siad or considered that thew workers lat the lower starter are not committed and unproductive. It should be born in mind that for any class of these the motivation directed to them tends to compensate the result of their performance. Hence, the primary aim and objective of this study are:
- To examine variable influencing workers performance for efficient organization operation.
- To highlight the efforts of job incentives as motivating tools for good workers behavior
- To determine the effect of high and low workers remuneration and other incentive motivators for a good organizations operation.
- To offer recommendations that might include the efficiency of organizations operation through job incentives
Before highlighting on the influence of job incentives in organizations operation there are certain problems that have to be stated in other to aid the sowing of the above mentioned topic. These include:
- What are the variable influencing workers performances for an efficient organization’s operation?
- What are the effects of job incentives as a management waiting tools for good workers behavior?
- What do high and low workers remuneration and other incentives motivator have on organization’s operation?
These and many more will be highlighted in the next chapter.
1.5 Significant Of Study
This research work is directed towards starting the influence of job incentives on workers and organizations operation of a particular business organization, and it is meant to be of benefit to different sectors in he Economy and other interested scholars.
The following are beneficiaries who will gain from this work.
- The government sector who is to use it for a successful operation in their various ministries.
- All drink manufacturing companies who should take the needed steps in implementing these incentives.
- Trade union group also find it beneficial in persuading companies to implementing it, for the benefit of their members.
- It should be useful to any intending researcher scholars and other interest group as well.
1.6 Scope Of Study
The researcher work is supposed to cover the nation as a whole but due to some limiting factors, it was only carried out to cover Enugu the capital city of Enugu state and centered on Nigerian Bottling company Plc ninth mile Enugu state
1.7 Limitation Of Study
The information supplied in this research work did not cover all the business organization around Enugu due to some inherent factors limited the execration of the research work. These factors such as lack of time as a result of combining academic work with the research work short of finance for transportation around the states and also the lack of research facilities to acquire the information needed this is a result of inadequate books to get all necessary information.
1.8 Definition Of Terms
This aspect of the study is very important because it defines the concept used in the work explicitly. Since mosst of the term might have different meaning to different people hence the following terms are defined in relation to their usage in this work
Is the increased efficiency of human labour and disposable resource in varying circumstances as used in the cause of production. It is termed as the outcome of the application of all factor of production in the causes of producing a particular product
Is the combination of human and material effort geared toward the achievement of certain objective this is made up of different section department carrying out different work but all aimed toward one objectives.
Is a system of work performed by an organization the act of performing some particular job in laid down process so as to achieve the set objectives.
D. Administrative Worker
This is that worker undertake general office or administrative workers like clerical worker which are distinct from a technical worker
E. Factory Worker
This is the worker who performs the real technical and manufacturing function in the factory or industry.
F. Job Incentives
This is define as compensation given to workers of an organization designed to influence furtive behavior of the workers.
G. Job Satisfaction
Can be defined as the viewing of the work done by employees and comparing it to know if it is favorable or unfavorable as regards to their want.
H. Wage Rate
This is the payment made or received either weekly or monthly in exchange for work or services rendered by labour or worker in production process.
I. Job Security
This is used in this study to means feature which enhance the continued retention of a job.
Can be defined an that inner motor or innerve that propel or impels a work to behave in a certain way. Despite the effort made in this study to operational define the se concepts, we still believe that specific purpose equi9re specific
This is the reward given to employee by an employer for his hard working ability towards his job example gift for active service or long services
L. Priced Job
These are compensation other than wage and salaries given to a work to attract and retain the worker to increase his moral and performance
This is a fixed period payment (ie monthly) made to non- manual workers. It is always expressed in annual terms and implies permanent employment more over in organization there are these competitive key that factor in organization which are cost price turnover and profit planning and control enable every individual in that organization to have a sound appreciation of financial implication of his plans and actions. Through in organization financial planing and control can be used by any size of type of organization and varying degrees from a complete system covering decentralized department to organization with only a single procedure.
As a tool of organization it can increase the efficiency of the organization as a whole since various department are involve. The efficiency and effectiveness of any organization solely depend on the number of factors which may be categorized as clarity of purpose management planning control and communication.
There are needs to have a sound knowledge of the aims and objective of the organization otherwise it will be difficult if not wholly impossible to identify goals, set target for their achievement in from of planning, control, and management of finance. Therefore, in every organization to achieve the objective of effectiveness and efficiency in both large and small organization , it is concerned that planning allocation of resources, monitoring thee usage of the resources to assist in doing this.
1.9 Free Market Economy
Economic situation which exist when with the exception of certain activities that are generally regarded as defense or what passes for law and order in modern society, all economic actives and transition are left up to the free choice of individuals. A free market economy is thus one which provide an environment in which individual are free to pursue their own economic welfare in what ever way they think best, and free of government regulation and restriction. In such an excrement in which individual are free to pursue their own economic walfare in whatever way they think best and free to make decision concerning their employment the use of their capital and the way that they disposed at their resources for example, as between saving and expenditure.. But there are various areas of contention concerning the definition and the consequence of a free market economy. First there is obviously scope for differences of opinion as to what activities ought to be the responsibility of the state rather than left to the free choice of individual for example most people would argue that since the right to life and liberty and protection from attack by ones fellow citizens is a basic right, it is not tradable and ones protection by the forces of law and order should not depend on ones ability to pay for it. In addition, up to a point some of the service of law and order constitute a “pure public good” in the sense that if a policeman patrol my street in order to deter potential burglars from entering my neighbors house, he will also the burglars from entering mine at no extra cost. Nevertheless many security services are provided buy private enterprise, and private individual often spend money to improve their own security. The armed guard standing outside a bank and paid by the bank to deter robbers might not help an old lady being mugged infant of him . hence no sharp individual line can be drawn between those activities that are or should be, provided by the state and those that are or, should be left to the free market similarly in many countries it is accepted that basic human right for example to life and hence to minimum health services. Similar consideration applies to education and to the provision of various other activities. In many countries that would be regarded as basically free market economic the state is largely responsible for other activities, such as rail transport, the postal services, public utilities, and so on. Even in contras where these activities are in the private sector it is usually accepted that government regulation is desirable to prevent such “natural monopolies “ from making excessive profits.
Secondly even the economic activities that are carried out by the private sector are usually constrained by government regulation of one kind or another. Many poof these correspond to fundamental political and philosophical views on the need to restrict freedom of individuals to do what they would like and to do so, might restrain the freedom of other individuals. This view is sometimes expressed in the proposition that my freedom to swing my first stops at the end of your nose. Thus for example economic freedom is usually constrained by various laws preventing the infringement of other people property right or enforcing laws of contract and so on. In other words it is usually accepted that the environment in which the force market economy operates is one that is regulated by such laws.
Government regulation however usually goes far beyond this, as there may be some trade off between freedom and some other basic human right for example regulation restrict the freedom of firms to employ child labour or slave labour in defense of certain basic human rights. Or to Beirut poisonous subtonics into the atmosphere or rivers, or to sell dangerous product in violation of the assumption that the consumer always knows what is best for himself or herself) thus differing views as to the extent to which the state should itself carry out certain activities (defense law and order health and education service public utilities and so on) and the extent to which the state should regulate those activities carried out by the private sector mean that there is no unique objective definition of what exactly is or should be a “free market economy”, but there is also scope for much disagreement as to the benefit effects of free market economy. In traditional western political philosophy, it is usually believed that the best good society is one in which individual accept responsibility for their decision and that this means that they should have the greatest possible freedom to make their economic choices. Furthermore it is believed by many that economic freedom is essential in order to preserve political freedom there is also a wrong tradition to the effect that fee markets are also more “efficient” in economic terms. Free marketing provides. Incentives to people to allocate their resource (including their labour and capital amongst the most produce good and services that respond to what the public wants and to use the techniques of production that most efficient. The experience of the past few decades, notably the collapse of the soviet bloc and the parlous state of its former member damply demonstrated the harmful economic effects of excessive state intervention.
At the same time, many people would object that the particular income distribution that will emerge from the operation of a Free market may not conform either to certain nation of justice” or even satisfy basic humanitarian concerns to all evictee acute poverty and destitution. It is also possible that it may permit the accumulation of vast wealth and powerful vested interest that may threaten the survival of political freedom. Hence, the existence of a free market economy does not necessarily means that the pursuit of other basic social value or the preservation of political freedom can be reelected.
Working arrangement where by a number of people co-operate in the production of items. Today the term factory” generally refers to a large establishment employing many people involved in mass production of industrial or consumer goods. Some from of the factory system however has existed since ancient times.
pottery work have been uncovered in ancient Greece and Rome, invidious parts of the Roman Empire factories manufactured glassware and bronze ware and other similar articles for export as well as for domestic consumption. In the middle ages, large silk factories were operated in the Syrian cities of ankakya and tyre and Europe, during the late medieval period textile factories were establish in several countries notably in haty flankers (now Belgium ) France and England.
During the renaissance the advance of science cont act with new world and the development of new trade routes to the for east stimulated of new trade routes to the far East stimulated commercial activity and the demand for manufactured good and thereby promoted industrialization in western Europe and particular in England during the 16th and 17th centuries many factories were created to produce such goods as paper firms, gunpowder, cost iron, glass, items of clothing, beer, and soap. Although heavy machinery operated by waterpower in some places, was used in a few establishments thee industrials process were generally carried on by means of hand labour and simple tools. In contrast to modern mechanized plant with assembly lines. The factories were merely. Large workshops where each labour functioned independently nor were factories the most usual place of production although some work used their employers tools and worked on the premises moister manufacturing was doe by workers who were supplied with raw material worked in their own homes, returned the finished articles and were paid for their labour.
Development Of Factory System
The factory system began to develop in the late 18th century. When a series of invention transformed the British textile industry and marked the beginning of the industrial revolution. Among the most important of these inventions were the flying shuttle patented (1733) by John Kary. The spinning jenny (1764) of James hargreaves, the water frame for spinning (1769) of sir Richard Arkwright the spinning mule (1779) of Edmund cartwrighte.
These inventions mechanized many of the hand process involved in spinning and weaving making it possible to produce textile much more quickly and cheaply. Many of the new machines were too large and costly for them to be used at home, however And it become necessary to move production into factories one of major technology breakthrough early in the industrial revolution was the introduction of team engines when textile factories first become mechanized, only waterpower was available to operate the machinery; the factory owner of was forced to locate the establishment near a water supply sometime in an isolated and inconvenient areas far from a labour supply. After 1785, when a steam engine was first installed in a cotton faxing steam began to replace water as power for the new machinery manufacturing could build factories closer to a labour supply and to market for the goods produced. The development of the steam locomotive and to market for the goods produced the development of the steam locomotive and steamship in the early 19th century made it possible to ship factory built products to distant markets more rapidly and economically thus encouraging industrialization. Samuel Slater, who started a factory in Pawtucket Rhode Island, introduced the Arkwrighht method of spinning into the limited states
Samuel Slater who started a factory in Pawtucket Rhode Island introduced the Arkwright method of spinning into the limited state in 1790. In 1814 at a cotton mill established in Waltham, Massachusetts all the steps of an industrial process were for the first time, combined under one roof: here cotton entered the factory as raw fibre and emerged as finished goods ready for sale.
Textile particularly cotton goods, were the major factory made products during the easy 19th century mean while new machinery and techniques were being invented that made it possible to extend the factory system to other industries. The American inventor Eli Whitney who stimulated textile manufacturing in the united states by inventing the cotton gin in 1793, made an equally of not more important contribution to the factory, if factory system by developing the idea of using interchangeable parts in making fire arms. Interchangeable pats with which Whitney began experimenting in 1798 eventually made it possible to produce firearms by assembling line techniques and to repair them quickly with premed parts. The idea of interchangeable part was applied to the manufacturing of timepieces from about 1820 on. Then in the 1850, at Waltham Massachusetts, automatic machinery was used for the first time to make watches by connotative processes in a single factory,. This by the middle of the 19th century American factor had begun to develop the out standing feature of the modern factory system mass production of standard articles. The clothing industrial were revolutionized by the sewing machine and under went a tremendous expansion during the 1860s. Spaniard by the urgent demand for uniforms during the American civil war, clothing manufacturing developed standardized a prerequisite for mass production of ready made germinates. At the same time the military demand for shoes stimulated the creation of shoe sewing machinery to mass produce foot wear.
As the 20th century began, the factory system of production prevailed throughout the united state and most of western Europe. Germany Britain the Netherlands and Belgium become to a great reactant importer of food and raw material and exporters of factory mades commodities.
In 1913 Henny ford, the pioneer motor manufacture introduction in the forsd motor plant. In time the factory system spread to Asia where cheap labour attracted capital from the industrialized countries of the west. Japan which had begun industrialization in the late 19th century rapidly become the fore most industrial power of as and a competitor to be western nations as the world economy has grown factory operation (especially in the developed world) have sought to increase productivity and efficiency through greater use of automation and new technology.
This and the closure of uncompetitive factories (often forced by completion from newly industrialization developing countries) has resulted in the phenomenon of de4 – industrialization in many developed national economic where the proportion of national out put and employment accoubnted for by industry. Falls some machines aided by computer seria conductors robots and other technological innovations are so nearly self regulating that an entire factory may be kept running by a few people operating sets of controls. This new industrial revolution has required much sophisticated approaches to the management of factories both in terms of strategy and day to day operations. To stay ahead of the competition, great skill, imagination, and rigour must now be applied to every thing from decisions on machinery and equipment purchases to quality control.
The inspection of factories by state agencies began in England in the early 19th century in response to public protest against the working conditions for women and child Labour. Today, throughout the developed would regulation exist governing such matters as child Labour; working hours, heath and shafting, and minimal wages, one agency was the international association of factory inspection established in 1886 by Canada and 14 state of the united stated after 1919 the international labour organization acting in co-operation first with the league of national and later with the united nations correlated the regulation of factory condition throughout the world through with no guarantee of enforcement of its standard
Working Condition In Factories
The introduction of the factory system had a profound effect on social relationship and living conditions. In early time the facial land and the guild master had both been expected to take some responsibility for the welfare of the sert apprentice and journey men who worked under them. By contrast, the factory owners were considered to have discharged their obligation to employees with the payment of wages: thus many owners took an impersonal attitude towards those who worked in the their factories. This was fact in part become no particular strength or skill was required temperate many of the new factory machinery. The owners of the early facting often were more interested in hiring a worker cheaply they in any other qualification. Thus they employed may women and children who could be hired for lower wages than men. These low paid employees had to work force long as 16 hours a day. They were subjected to pressure and even physical punishment in an effort to make them speed up production.
Retention of an individual by a person or institution to provided labour in return for wages or other payment this is distinct from far instance serfdom slavery where the labour is not freely provided in return for payment and does not represent a cost for the employer. In economic the term can be broadened to cover other factors of production such as land and capital but the common usage refers to paid workers. Employment generally exclude those whose workers. Is unpaid such as housewives or Self employment also provided a considerable part of over all employment between a quarter and a half of the workforce in developing countries where an individual is effectively working for and paying himself or herself. Related to these cases care trelance or tempering employment, where an individual employee make a contract to supply his or her labour part time work and piece work.
Broad division are often made between employment in the agricultural industrial and service sector economic development world wide has so far exhibited a general shift in employment through these toward services as the economy development prediction of future pattern of employment suggest a growth in self employment and irregular freelance or contract labour in the developed economic with worker acting of active vender selling a putfoeo of skills to interested institution. This postulates an increasing unstable and fluid pattern of employment engendered by fierce global competition for work however under development in broad sectors of the third world is likely to limit employment opportunities for much of the worlds population to bare subsistence farming for the sent.
Terms and conditions are historically one of the most contentious aspect of employment because of their over all effect on the standard of living of the4 workers and the condition of society as a whole, child labour and other mutinous abuses of the early factory system are an integral phases in the evolution of modern n employment world bodies such as the international labour organization proved general standards of employment. Hours of labour, sick pay holiday entitlement and other such work place benefit have in may cases been secured only after prorated struggle between trade union or professional bodies and employers reluctant to advice profits by incurring the cost involved. These cost are of the major factors in the present perceived shift of work away from full time salaried labour. Likewise collective bargaining has been one aspect of labour relation testifying to the tradition al structure of employment with employees and employers effectively dividual into two camps. Some complained especially in Japan attempt to break down such division through common uniform, and canteens for all level of shaft also operating extensive benefit schemes for their employees even in some case guaranteed life time employment
Employment is the subject of a great variety of state initiative with most developed countries as ping (a least in theory) to the goal of full employment in which all who are able to work and wish to make can find work education and training policies are aspects of the effort to reduce unemployment, and thus achieve a stable and prosperous society. Equal opportunity and equal pay legislation are also typical of government efforts to spread employment opportunities as widely as possible. Employment as the social cultural and even political context of individual countries.
In economic price paid for labour wages consist of all payment that compensate individual for time and effort spent in the production of economic goods and service. The payment include not only wages in the ordering narrow sense the earning computed generally on an hourly daily weekly or output basis, of manual and clerical worker but also weekly monthly or annual salaries of professional and supervisory personnel bonuses added to regular earning premiums for night or holiday worker or for work exceeding stated norms of quantity and quality. Fees and trained for professional services and that pat of the income of business owners that compensate them for time devoted to business.
Wage may be reckoned at time rate piece rate or incentive rate. Wage earner on time rats, may be docked for days, hours or even minutes of absence or idleness but salaried workers usually received fixed sums for each pay period whether or not they are continuously on the job. Workers on piece rates are remunerated uniformly for each unit output. These receiving incentive wages are paid according to formula relating out put to earning in wage designed to induce higher production.
A high rate of pay does not ensure laage annual earnings. Buiding workers are paid relatively high hourly rate, but their annual income often is now because of the irregularity of their employment. In addition, nominal wages do not reflect real earning accurately. During a period of inflation the real value wage may fall although nominal wage rise because the cost of living rise more rapidly than monetary earning deduction from wages for income taxes pension payment trade union dues insurance premiums and other Ohanges further reduce the worker take home pay.
The influences detraining wage levels in particular counting at particular time are as follows:
- Cost of living: even in poor societies wage are usually at least sufficient to pay the cost of sustaining worker and their children otherwise the working population will not reproduce itself and will decline.
- Standards of living prevailing living stands influence conception of what constitution a so called living wage, thus helping to determine wage levels improvement in general living conditions general moral pressure for giving laborers a share of the better life in the presence of such pressure employers are more inclined to grant wage increase and legislators are constrained to approve minimum wages legislation and other laws designed to amdiorate the worker lot.
- The relative supply of labour where labour is scare relative capital land and other factor of production as in the united state in the 19th century employers competitive bidding for labour tends to raise the general wage level. Where as in present day India the ration of labour to the resources is high and where according the supply of labour greatly exceeded demand competition among labour for the relatively few available jobs tends to depress the wage level.
- Productivity: Wages tend to rise with productivity. Productivity depends on the energy ad skill of the labour force and even more on the level of technology employed. Wage level in developed economic are high largely because workers applied skill of a light order to the operation of an abundance of the most advanced industrial equipment.
- Bargaining power: The organization of labour in trade union and in political association enhances its relative bargaining power and thus tends to win for organized labour especially in time of deflation a large share of the national income.
General Wage Level
The general wage level is an average of widely differing individual pay rate and earnings. The various elements contributing to wage differentiation are as follows:
- Relative value of production an industrious and skilled worker who produces a more valuable output than workers of lesser capabilities is with more to an employer and usually is paid more.
- Cost of required capabilities: Employees must pay the price of special training it they are to fulfill their need for work so trained if engineers did not recessively more compensation than building labour, relatively few people would invest the time money and effort required to become e engineering.
- Relative scarcity of specific kinds of labour common labour is paid poorly because it is common but entertainers such film stars and television performance who have qualities regarded of unique enjoy very large income.
- Comparative attractiveness of occupation: difficult disagreeable or dangerous jobs usually bring higher rate of pay than do more inviting jobs requiring comparable skill thus a lorry driver engaged in moving explosive earns more than one delivering groceries
- Mobility of labour: Where the working population immobile wages differential is wide. On the other. Hand, the readiness of workers to change jobs or to move long distance to better paying position tends to narrow wage differentials among firms, occupations and communities.
- Comparative bargaining strength: A union may lift the wages of its members above the scale paid to unorganized workers of equal skill
- Custom and legislation: Many wages differentials are rooted in customer or legislation for example both custom and legislation are responsible for the fact that black miners in south Africa long earned only a fraction of the wage paid white miners doing equivalent work. On the other hand government and union frequently act to eliminate wage differentiates based on race sex and other irrelevancies and to promote equal pay.
Theories Of Wages
Most wage theories reflected over emphasis or one other of the element detaining wages the first note worthy wage theory. The just wage doctrine of the Italian philosopher at Thomas aguire emphasized moral consideration and the role of custom. A just wage is defined as that which enables the recipient to live in a manner suited to the persons social position. Aquinas theory is a view of what wage should be rather than an explanation of what they actually are. The first modern explanation of wages, the so- called subsistence theory emphasized the consumption needed to sustain life and maintain the working population as the chief determinant of wage level. The theory was enumerated by mercantilist economist elaborated by Adam smith and developed fully by David Ricardo. Ricardo argued that wage are determined by the cost of barely sustaining labourers and their replacement and that wage can no longer depart from the subsistence level. If earning should fall below that level he countered the labour force would not reproduce itself. If earning should rise above it, more working. Class children than the number needed to replenish the Labour force would survive and wage again would forced would down to subsistence levels by the competition of labour for the available jobs the assumptions of the subsistence theory were invalidated by the fact of subsequent economic history. In advanced countries the output of food and other consumer goods increase more rapidly than population during the later 19th and 20th centuries and wages accordingly rose well above subsistence level.
The wage theory of Kar Marx is a Variant of Ricardos, wage theory. He argued that under capitalist as their profits appropriate the surplus remaining. Like Richard theory Marx’s view was nullified by later economic experience.
After the decline of the subsistence theory attention shifted to demand for Labour as a wage determinant john Stuart mill among others, propounded the so called wages fund theory to explain how the demand for labour as expressed in the money employers has available to pay Labour influences wages. Theory rests of the assumption that all wages are paid out of past accumulation of capital and the average wage rate is determined by dividing the share set aside for wages by the number worker could wage reduction for reducing the number of labourers could the wage level by raised. The wages fund theorists were mistake in assuming that wage are paid out of past capital accumulations. Wages actually are paid mainly out of current production. Wage stimulate production. And generate more wage increases by strengthening buying power may stimulate production. And generate more wage paying potential especially if unemployed resource exist.
The wages fund theory was succeeded by the marginal productivity theory concerned mainly with the influence excerpted by the supply and demand of Labour. Proponents of the theory. Which was developed largely by the American economist John Bates Clark maintained the wage tend to be set at the pointy at which employers find it profitable to engage the last job seeking worker, who is called the marginal worker.
Because by the law of diminishing return the value of each additional workers contribution to production is supposed to adminish growth of the labour force depresses wage. If wage should rise above the level assuring full employment part of the Labour force would become unemployed; it wagers should fall below that level competitive bidding by employers for the additional workers would push wages up again.
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