Labour and Wages


Supply of labour may be defined as the total number of people of working age offered for employment at a particular time and at a given wage rate.

This supply of labour also relates to the quantity of labour.


  1. The size of population and population growth
  2. The age structure of the population
  3. The official school leaving age
  4. Official age of entry and retirement
  5. The number of people the pursue full time education beyond the normal school leaving age
  6. The number of married women who take up paid employment
  7. The number of people of working ages in the country who are disable or incapacitated
  8. The number of able-bodied people in the country who are not willing to work
  9. The number of working hours per week
  10. The rate of remuneration or the wage rate


Demand for labour may be defined as the total number of workers employer are willing and ready to employ or  hire at a particular time and at a given wage rate

The demand for labour relates to the quantity of human effort required by entrepreneur for carrying out production.

The demand for labour is a derived demand


  1. The number of industries in a country
  2. The nature of industries
  3. The quantity of other factors of production available
  4. The price of labour or the wage rate
  5. The state of employment in the economy
  6. The demand for labour output and the price level within the economy.


Wages refers to payment to labour on a daily or weekly basis

Salaries refer to the payment made to labour on a monthly basis.


  1. Nominal Wages: It is the actual money paid for labour in a particular period of time
  2. Real Wages: This is the purchasing power of labour. Real wages refer to wages in term of goods and services the wages can buy.


  1. The forces of demand and supply in a market economy. The wages of labour in a market economy can be determined through the forces of demand and supply.

Wage rate in a competitive labour market can be determined in the following manner

  1. When the supply of labour exceeds the demand, wage rate will fall
  2. When the demand for labour exceeds the supply, wage rate will rise
  • When the demand for labour equals the supply wage rate will be favourable to both the employer and the employee.
  1. Government activities and policies: Government institution and wages commissions set up by the government help in determining wages, especially in the public services.

In fixing wages, the government agency or wage commission takes the following factors into consideration.

  1. Cost of living: The  higher the cost of living, the higher wages are likely to be
  2. Level of productivity: The greater the level of production in the country, the higher the wage rate.
  • Type of occupation: The wage structure varies from one occupation to another.


  1. Differences in cost of training
  2. Differences in period of training
  3. Skill needed at work
  4. The bargaining power of the trade union
  5. Degree of risk involved in an occupation
  6. The prestige attached to an occupation.

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