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The formal statement of the equilibrium condition of the Harris–Todaro model is as follows: [2] Let be the wage rate (marginal productivity of labor) in the rural agricultural sector. Let be the total number of jobs available in the formal urban sector.
These supply and demand curves can be analysed in the same way as any other industry demand and supply curves to determine equilibrium wage and employment levels. Wage differences exist, particularly in mixed and fully/partly flexible labour markets. For example, the wages of a doctor and a port cleaner, both employed by the NHS, differ greatly ...
In labour economics, Shapiro–Stiglitz theory of efficiency wages (or Shapiro–Stiglitz efficiency wage model) [1] is an economic theory of wages and unemployment in labour market equilibrium. It provides a technical description of why wages are unlikely to fall and how involuntary unemployment appears.
The marginal revenue productivity theory of wages is a model of wage levels in which they set to match to the marginal revenue product of labor, (the value of the marginal product of labor), which is the increment to revenues caused by the increment to output produced by the last laborer employed.
The theory of compensating wage differentials, by Adam Smith, provides a theoretical framework of the ideology behind pay differences. The theory explains that jobs with undesirable characteristics will compensate with higher wages compared to the popular, more desirable jobs, who provide lower wages to its workers. [13]
If p is the price level and W is the wage rate in money units, and if X is a value in real terms, then Xp/W is the same value in wage units; if Y is a monetary value, then Y/W is the value in wage units. If prices and wages move together, then values in wage units move in parallel with real values.
This describes the rate of growth of money wages (gW). Here and below, the operator g is the equivalent of "the percentage rate of growth of" the variable that follows. = The "money wage rate" (W) is shorthand for total money wage costs per production employee, including benefits and payroll taxes. The focus is on only production workers' money ...
In an economy with involuntary unemployment, there is a surplus of labor at the current real wage. [1] This occurs when there is some force that prevents the real wage rate from decreasing to the real wage rate that would equilibrate supply and demand (such as a minimum wage above the market-clearing wage). Structural unemployment is also ...