Marginal Productivity Theory
The marginal revenue productivity theory of wages is a model of wage levels in which they set to match to the marginal revenue product of labor, MRP (the value of the marginal product of labor), which is the increment to revenues caused by the increment to output produced by the last laborer employed. In a model, this is justified by an assumption that the firm is profit-maximizing and thus would employ labor only up to the point that marginal labor costs equal the marginal revenue generated for the firm.Daniel S. Hamermesh. 1986. The demand for labor in the long run. ''Handbook of Labor Economics'' (Orley Ashenfelter and Richard Layard, ed.) p. 429. This is a model of the neoclassical economics type. The marginal revenue product (MRP) of a worker is equal to the product of the marginal product of labour (MP) (the increment to output from an increment to labor used) and the marginal revenue (MR) (the increment to sales revenue from an increment to output): MRP = MP \times MR. The t ...
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Wage
A wage is payment made by an employer to an employee for work (human activity), work done in a specific period of time. Some examples of wage payments include wiktionary:compensatory, compensatory payments such as ''minimum wage'', ''prevailing wage'', and ''yearly bonuses,'' and wiktionary:remunerative, remunerative payments such as ''prizes'' and ''tip payouts.'' Wages are part of the expenses that are involved in running a business. It is an obligation to the employee regardless of the profitability of the company. Payment by wage contrasts with salary, salaried work, in which the employer pays an arranged amount at steady intervals (such as a week or month) regardless of hours worked, with Commission (remuneration), commission which conditions pay on individual performance, and with compensation based on the performance of the company as a whole. Waged employees may also receive tips or gratuity paid directly by clients and employee benefits which are non-monetary forms of ...
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