Time Wages and Piece wages – Economics Notes by KFDN
Wages are a payment for the services of labor, whether mental or physical. Though in ordinary language an office executive, a minister or a teacher is said to receive a salary; a lawyer or a doctor a fee; and a skilled or unskilled worker a wage, yet in economics, No such distinctions are made for different services and all of them are said to receive a wage.
In other words, wages include fees, commissions, and salaries.
Time and Piece wages
The wages which are paid weekly, fortnightly, or monthly and partly at the end of the year in the form of bonus are called Time wages. A bonus may be the task wage if a work is finished within specified period or before that. Wages are also paid in accordance with the amount of work done say in a shoe factory or a tailoring department as per one pair of shoes or pants manufactured. If rate per pair of shoes or for pants is Rs. 50, a worker will be paid according to the number of pair of shoes or pants manufactured this is called Piece wages.
Money and Real wages
Money wages relate to the amount of money income received by workers for their services in production. It is also called as nominal wages.
Real wages include the various facilities, benefits, and comforts which workers receive in terms of goods and services for their work.
These are in addition to the money wages of workers.
Real wages depends upon following factors:
- Price level: The purchasing power of money depends upon the price level. When the price level rises, the purchasing power of money gets reduced, thus adversely affects the real wages of workers. Every increase in the price level reduces the purchasing power of money. This leads to falling in real wages of workers.
- Money wages: The size of the pay packet received by the worker is an important determinant of his real wages. The greater the money wages, the greater will be the real wages, other things remaining the same.
- The regularity of work: A permanent job, even though it carries a smaller money income, is considered to be better than a temporary job which may yield high rewards in term of money.
- Nature of work: The nature of work also plays an important role in determining the level of real wages. Some jobs are pleasant while others are not. Similarly, some occupations are enjoyable while others are not All these considerations have to be given weightage in determining real wages.
- Future prospects: An occupation carrying the promise of better prospects of promotion in the future is considered to be better than the one which doesn’t do so, even the money wages offered by the latter may be high.
- Extra benefits: In some occupations, employees receive in addition to their pay, some extra benefits. For example, the manager of the firm gets an addition to his pay, a well-furnished bungalow, free medical help etc.
- Trade expenses: These refer to the expenses one has to incur in the course of one’s occupation. These expenses are high in some occupations while in others they may be moderate. These expenses should be deducted from the money income in order to arrive in the real wages.
- Social prestige: The real wages of employees engaged in prestigious occupations are high as compared to real wages of employees working in ordinary occupations.
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