There are several factors, which influence the wage rates. The variations in wage structure in various industries are the results of these factors. Some important factors are:
1.Demand and Supply:
The wage rates are fixed by the demand and supply position of the workers in the labour market. If labour is in short supply, the workers will offer their services only if they are paid well. On the other hand, labour may be available at cheaper rates if their supply is in plenty.
2.Bargaining Power:
Wages also depend to a considerable extent on the relative bargaining power of the labour unions and the employers. Where labour unions are strong enough to force the hand of employers, the wages will be determined at a higher level in comparison to other units where unions are weak.
3.Cost of Living:
Progressive employers do not leave the wages to be determined by the blind forces of demand and supply. They take due notice of the cost of living for the workers at that place and try to fix the wages as to ensure a decent living wage to the workers.
4.Condition of Product Market:
The wage levels will be influenced by the degree of competitions prevailing in the market for the product of the industry. If it is a perfect competitive market the wage level may be at part with the value of the net additions made by the workers to the total output.
5.Comparative Wages:
Wages paid by other firms in the same market for similar work also influence the wage levels. Wage rates must also be in consistent with the wages paid by other firms in the same industry. The comparative wages will increase the job satisfaction among the workers.
6.Ability to Pay:
Wage rates are influenced by the ability of industry or firm to pay its workers. Those firms, which are earning huge profits, may naturally afford much better wage rates and more facilities to its workers in comparison to those firms, which are earning only marginal profits.
7.Productivity of Labour:
Productivity is considered to be the main basis of wage- determination. In firms, where productivity of lab OUT is high, higher wages are paid as compared to other firms where it is low.
8.Job Requirements:
A worker is compensated according to the job requirements. If a job requires higher skill, greater responsibility and risk, the worker placed on that job will naturally get higher wages in comparison to other jobs which do not require the same degree of skill, responsibility or risk.
9.Government Policy:
Since the bargaining power of the workers is not enough to ensure fair wages in all industries, the Government has to interfere in regulating wage rates to guarantee minimum wage rates in order to cover the essentials of a decent living.
10.Goodwill of the Company:
A few employers want to establish themselves as good employer in the society and fix higher wages for their workers. It attracts qualified employees.
