Download Traditional Theory of Wages

Collective Bargaining
• Collective bargaining is a process of
negotiations between employers and a
group of employees aimed at reaching
agreements that regulate working conditions.
– The interests of the employees are commonly
presented by representatives of a trade union to
which the employees belong.
• The collective agreements reached by these
negotiations usually set out wage scales, working
hours, training, health and safety, overtime, and
rights to participate in workplace or company affairs.
Mediation
• 3rd Party suggestion as to terms of
agreement
Arbitration
• 3rd Party mandate as to terms of
agreement
Traditional Theory of Wages
Supply and Demand of labor
- If lots of people can do what you can
do, you’ll be paid accordingly
Theory of Negotiated Wages
If you’re in a union, you’ll earn more.
Signaling
Theory
Degrees and certificates =
higher pay
Labor Mobility
If you’re willing to move, you might be
in higher demand
Categories of Labor
• Unskilled Labor
– Mopping floors, picking fruit
• Hardly any capital investment in
employee
– Hence, least pay out there
• Semi-skilled Labor
– Lawn mowers, floor polishers,
• Few weeks of capital investment in
laborer
– Minimal amount of training, hence, low
pay
Categories of Labor (cont)
• Skilled Labor
– Carpenters, typists, computer techs.
• Higher investment in human capital (experience
and training
– Hence, better pay because not easily replaced
• Professional Labor
– Scientists, lawyers, doctors
• Lots of training / human capital investment
– Highest paid