Describe the factors that could cause an increase in the wage rate of workers.
Wage rate refers to the remuneration paid to the workers. Wages are considered as expenses by the firms.
1. Ability to pay: The ability of the firm to pay the workers will influence the wage rate. If the firm is facing a situation of loss, they may not pay higher wages to their employees. When the firm earns more profits, the workers will be paid off with higher wage rates.
2. Demand and Supply: If the demand for a particular job is high and the supply is less, the wage rate will increase to hire more such laborers, and if the supply is more, then wage rates will be reduced because workers will be available at lower wages.
3. Cost of living: Laborers accept a wage rate that always ensures them a minimum standard of living. Therefore, wage rates are directly influenced by the cost of living.
4. Prevailing Wage rates: Workers always prefer works where they get more payment. So, prevailing wage rates play an important role in fixing wage rates for the employees. If the employees are less paid, the laborers leave their jobs and find a job where they get more payment.
5. Trade Union: Trade unions can influence the wage rates of employees. The wage rate will be high comparatively if the labor union is strong.
6. Government Regulations: To bring good working conditions for the laborer's government passes legislation fixing minimum wages for the workers.
7. Output/productivity: A worker's contribution to increasing output is known as productivity. Wage rate increases as there occurs an increase in productivity and output.
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