Equilibrium Wage
Equilibrium wage is the wage rate at which the supply of labor and the demand for labor are equal. This is the point at which the number of people willing to work for a certain wage is equal to the number of jobs available at that wage. It is also known as the market-clearing wage, as it is the wage rate that clears the labor market of any excess supply or demand. The equilibrium wage is determined by the interaction of the forces of supply and demand in the labor market.
History of Equilibrium Wage
The concept of equilibrium wage was first introduced by the classical economists in the late 18th century. They argued that the wage rate was determined by the interaction of the forces of supply and demand in the labor market. The classical economists believed that the wage rate would eventually reach an equilibrium point, where the number of people willing to work for a certain wage was equal to the number of jobs available at that wage. This equilibrium wage rate was seen as the natural wage rate, and any attempts to interfere with it would lead to an inefficient allocation of resources.
In the 20th century, the concept of equilibrium wage was further developed by the neoclassical economists. They argued that the wage rate was determined by the marginal productivity of labor, which is the additional output produced by an additional unit of labor. This means that the wage rate is determined by the productivity of the workers, and any attempts to interfere with it would lead to an inefficient allocation of resources.
Comparison Table
| Equilibrium Wage | Marginal Productivity of Labor |
|---|---|
| The wage rate at which the supply of labor and the demand for labor are equal. | The additional output produced by an additional unit of labor. |
| Determined by the interaction of the forces of supply and demand in the labor market. | Determined by the productivity of the workers. |
| Any attempts to interfere with it would lead to an inefficient allocation of resources. | Any attempts to interfere with it would lead to an inefficient allocation of resources. |
Summary
Equilibrium wage is the wage rate at which the supply of labor and the demand for labor are equal. It is determined by the interaction of the forces of supply and demand in the labor market, and any attempts to interfere with it would lead to an inefficient allocation of resources. For more information about this term, you can visit websites such as Investopedia, The Balance, and Economics Online.
See Also
- Minimum Wage
- Living Wage
- Real Wage
- Wage Differentials
- Wage Rigidity
- Wage Inequality
- Wage Discrimination
- Wage Subsidy
- Wage Rate
- Wage Bargaining
