Subsistence Theory of Wages:
The Subsistence Theory of Wages, also known as the "Iron Law of Wages," was an alleged law of economics that asserted that real wages in the long run would tend to the value needed to keep the workers' population constant.
According to this theory, wages are tend to maintain the evel just significant to maintain the workers at the minimum subsistence. If the level of wages rise above the sussistence level. So the supply of labor become high in mnumber or large. The supply of labor brings wages downward to maintain the subsistence level. If the wages falls below the subsistence level, the supply of labor decrease until wages rise to maintain the subsistence level. It is supposed that the supply of labor is infinetly elastic.
Critisism:
Critisism on subsistence theory of wages are as under:
The subsistence level is uniform for all working labor with certain exceptions. The theory thus does not explain differences of wages in different employments.
The fundamental weaknesses of subistence theory lies in its long term character. It contains adjustment of wages over lifetime of a generation and does not explain wage influctuations from year to year.
"The subsistence minimum" vary vague, thus it prefers to the minimum requirements of a modern man or of a tribal savage? There is not rapidly fixed minimum and it is not independent of the wages ruling over a period of time.
The Subsistence Theory of Wages, also known as the "Iron Law of Wages," was an alleged law of economics that asserted that real wages in the long run would tend to the value needed to keep the workers' population constant.
According to this theory, wages are tend to maintain the evel just significant to maintain the workers at the minimum subsistence. If the level of wages rise above the sussistence level. So the supply of labor become high in mnumber or large. The supply of labor brings wages downward to maintain the subsistence level. If the wages falls below the subsistence level, the supply of labor decrease until wages rise to maintain the subsistence level. It is supposed that the supply of labor is infinetly elastic.
Critisism:
Critisism on subsistence theory of wages are as under:
The subsistence level is uniform for all working labor with certain exceptions. The theory thus does not explain differences of wages in different employments.
The fundamental weaknesses of subistence theory lies in its long term character. It contains adjustment of wages over lifetime of a generation and does not explain wage influctuations from year to year.
"The subsistence minimum" vary vague, thus it prefers to the minimum requirements of a modern man or of a tribal savage? There is not rapidly fixed minimum and it is not independent of the wages ruling over a period of time.
