Everything you need to know about, “THE WAGE FUND THEORY”

INTRODUCTION A wage is a payment that is usually paid for the services offered by the workers. Wages are usually paid according to a contract or on the basis of hour, day or on the piece work basis. It is very important that every worker is rightly and equally paid for the work done by them. This where the theories of wages play an important role in determining the wages and the share of contribution made by the labour force. THE WAGE FUND THEORY Wage fund theory was proposed by the Scottish economist, Adam Smith . Further this theory was explored and advanced by John Stuart Mill (J.S. Mill). This theory was developed on an assumption that a certain part of capital is kept aside only for the purpose of wage payment. This amount of capital that is reserved for the payment of wages is known as wage fund. The wage fund is predetermined or fixed. Smith stated that the demand for labour could not increase without the increase of the funds that is reserved for the payment of wages. ...