SUBSISTENCE THEORY OF WAGES
If wages rises above subsistence level on increase in population is inevitable from / follows and this wages should be paid to the level of subsistence (meeting basic needs ).
- It is not realistic. It is not necessary when income increase and also population increases.
- Does not explain the equality between higher earners and lower earners in a country.
- The theory attempts to explain mainly only on the supply side with efficiency
The theory was probably true at the time that it was formulated since there was poor harvest in those days which means that many people died of starvation. It may still be true to some of more densely populated where the standard of living is low.
CAN TRADE UNIONS RAISE WAGES?
Trade unions can raise their wages if they follow this:-
- If workers are paid below marginal productivity.
- By increasing marginal productivity by other means. ie they pressurize an employer by demand for modern machines, capital etc.
- By using demand for labour. Through make the change of technique interview in human labour.
- Raised for particular type of labour in industry i.e education skills.
- If wages take small portion in the cost of production. An employer can provide (rise the wage of a worker ) wage to a worker,if the wages take small portion in the cost of production.
COLLECTIVE BARGAINING AND TRADE UNION
Collective bargaining refers to the negotiations between a trade union and employer or an employer’s organization over the wages and work condition.
Is the continuous association of wage earners for the purpose of monetary and improve paying of the workers and condition of working.
Example; in Tanzania we have TFTU –Tanzania Federation Trade Union.
FUNCTIONS OF TRADE UNIONS
- Bargaining on behalf of the workers for maintenance of better pay and good working condition i.e. provision of education, holiday recreations and
- To safe guard jobs. One should actual be sure of not losing job.
- To offer monetary benefits i.e. sickness and accident person.
- To restrict the supply of labour so as to maintain their demand i.e. the higher the demand, the higher wage rate.
- To keep all its members employed.
- To participate in national and international social economic organizations. E.g. ILO.
FACTOR AFFECTING THE STRENGTH / POWER OF TRADE UNION
- The size of its membership.
If the trade union has large size of members, its strength will be large, likewise if the trade union shows a small size of its member its strength will be less.
- The extent of the effect it cause to the community or society to strike.
- General economic conditions of the trade unions.
- The nature of demand and supply of labour and product.
- Proportion of the wage to the total cost of production.
RENT (THE REWARD TO LAND)
Is the reward to the use of services of land, according to Ricardo.
Is that portion of produce of the earth which is paid to the landlord for the use of original and indestructible power of the soil.
How does rent arise
- According to Ricardo opinion rent arise only on land not on other factors of production.
Because of the following peculiarities of land which are not found in other factors of production.
- Land is free. It is a gift of nature hence it has no cost of production from societies’ point of view.
- The supply of land is fixed and inelastic in the long run.
- According to Ricardo “the continuous rise in population of the law of diminishing returns are the two principle reasons for the emergence of economic rent.
Thus According to Ricardo rent a rises because different plots of land have different fertility power.
Thus the difference in fertility power has been the reason for the emergence of economic rent.
What is economic rent?
Refers to the payment received by a factor over and above what is necessary to induce that factor to enter its present employment or to keep it there.
Refers to the minimum earning that must be paid to a unit of any factor to hold its present use. It is minimum payment that keeps a factor in the present occupation.
E.g. Economic rent = present earning – transfer earning.
Consider rent under extensive cultivation.
|Grand of land||Total production in (000)||Rent (Tsh)|