Wage determinant Essay Example | Topics and Well Written Essays - 500 words

Wage determinant - Essay Example The main emphasis of this paper is on the role of productivity in determining wage rates with respect to competitive markets such as the U.S. Productivity as a Wage Determinant Productivity is defined as the ratio of input to output. However, productivity can denote both ‘total factor productivity’ and ‘labor productivity’ (Backman). Labor productivity, traditionally, is seen as the output produced per hour/unit of time (Backman). The 1960’s and 1970’s saw a fall in productivity levels in the U.S (Backman). However, the economy recovered in the 1990’s and 1995 onwards was marked by very high levels of productivity. As far as wage markets are concerned, the more appropriate concept is that of labor productivity as it bears direct relation with the wage rate. As far as the U.S is concerned, the importance of this factor in determining wage levels dates back to 1948 when labor contracts underwent positive change throughout the automobile in dustry (Lewin and Kaufman). Later, in the 1960’s another proposition came into play that wage rates in an organization should be linked to the productivity of the economy as a whole (Lewin and Kaufman). This proposition has been heavily debated.