Chapter 15: Wage Determination

Nicholas A. Jolly & Kenneth A. Couch

Wage determination Wage determination refers to the market process that establishes the amount a firm pays a worker for a unit of time. A market exists when there is demand for and supply of a product. In the case of the labor market, firms demand individuals' time as an input for production, and workers supply it. The nature of the labor market, including the number of firms and special qualities of workers, influences the wage determination process. Other social institutions such as the government and interactions between individuals, including those characterized by racism and sexism, also influence payments made to workers. This chapter discusses the basic process of wage determination along with the influences of market structure, government regulation, and other social interactions on it. One reason wage determination receives broad attention among economists is that payments to labor constitute roughly 70% of the gross domestic product of every industrialized ...

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