According to him, the employers set apart a certain amount of capital to pay wages for labourers. Wages increase only with an increase in capital or a decrease in the number of workers. This fund could be utilized for employing laborers for work. The theory of wages antonella stirati working paper n. This theory is developed by classical economist named j. Smith said that the demand for labour could not increase except in proportion to the increase of the funds destined for the payment of wages. Even if this problem is solved by introducing a wage fund theory, this theory cannot, however, be traced in the classical economists. After 1865 the wages fund theory was discredited by w. Wage is determined by the amount of wages fund and the total number of labourers. A dissertation in economics submitted to the graduate faculty of texas tech university in. The wage fund is distributed among the workers employed. The wage fund doctrine is a concept from early economic theory that seeks to show that the amount of money a worker earns in wages, paid to them from a fixed amount of funds available to employers each year, is determined by the relationship of wages and capital to any changes in population. How are wages determinedtheories of wages determination. According to mill, wage level is determined by wage fund and the number of workers employed.
His theory was based on the basic assumption that workers are paid wages out of a predetermined fund of wealth. Principles of political economy, with some of their applications to social philosophy. His basic assumption was that wages are paid out of a predetermined fund of wealth which lay surplus with wealthy persons as a result of savings. As per the wage fund theory, the wage level depends on the quantity of the wage fund and the number of people who are employed. It would appear, therefore, that according to this theory efforts of trade union to raise wages would prove full. The wagefund doctrine is a concept from early economic theory that seeks to show that the amount of money a worker earns in wages, paid to them from a fixed. This fund, he called, wages fund created as a result of savings. Walker, all of whom argued that the demand for labour was not determined by a fund but by the consumer demand for products. Wage fund refers to the amount of capital that an employer keeps for paying wages to labor. Taussig, in his classic work on the wages fund, correctly iden. Request pdf wages fund the wages fund doctrine was an important. Wage fund theory of wage this theory is developed by classical economist named j. Wages, thus, cannot rise unless either the wage fund increases or the number of workers decreases but since the theory takes the wage funds fixed, wages could rise only by a reduction in the number of workers. The average wage rate is determined by dividing the wage fund by the total number of workers employed.
Furthermore, the proponents of the wages fund doctrine had been unable to prove the. Pdf the classical theory of wages and its interpretations. Wages fund theory this theory was developed by adam smith 17231790. We use your linkedin profile and activity data to personalize ads and to show you more relevant ads. A refutation of the wages fund theory of modern political economy as enunciated by.