Compensation For MBA

  1. Wages Fund Theory: This theory was developed by Adam Smith (1723-1790). His theory was based on the basic assumption that workers are paid wages out of a pre-determined fund of wealth.   This fund, he called, wages fund created as a result of savings. According to Adam Smith, the demand for labor and rate of wages depend on the size of the wages fund.    According to this theory, therefore, trade unions cannot raise wages for the labor class as a whole.  The efforts of trade unions to raise wages are futile. If they succeeded in raising wages in one trade, it can only be at the expense of another, since the wage fund is fixed and the trade unions have no control over population.   2. Subsistence Theory: This theory was propounded by David Recardo (1772-1823). According to this theory, “The labourers are paid to enable them to subsist and perpetuate the race without increase or diminution”.  This payment is also called as ‘subsisten...

  Demand and Supply Theory According to Marshall, the determination of wages is affected by the whole set of factors which govern demand for and supply of labour. It is therefore necessary to understand the various factors, which influence the demand for and supply of labour. The employers' demand for labour is dependent on a number of factors such as the demand for his/her product, availability of other factors of production (the most important being the supply of capital), the level of technological progress, etc. The demand price of labour is determined by the marginal productivity of worker. Supply of labour can be viewed in a number of ways.  First, it may refer to the number of workers seeking employment. This number will vary not only with the total population, but also with the proportion of the population, which is proletarianized. These are the workers with no alternative livelihood who join the labour market seeking employment for wages.  Secondly, it may ...