Wage

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A wage is payment made by an employer to an employee for work done in a specific period of time. Some examples of wage payments include compensatory payments such as minimum wage , prevailing wage , and yearly bonuses, and 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.

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Payment by wage contrasts with 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 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 compensation. Since wage labour is the predominant form of work, the term "wage" sometimes refers to all forms (or all monetary forms) of employee compensation.

Origins and necessary components

Wage labour involves the exchange of money for time spent at work. As Moses I. Finley lays out the issue in The Ancient Economy :

The very idea of wage-labour requires two difficult conceptual steps. First it requires the abstraction of a man's labour from both his person and the product of his work. When one purchases an object from an independent craftsman ... one has not bought his labour but the object, which he had produced in his own time and under his own conditions of work. But when one hires labour, one purchases an abstraction, labour-power, which the purchaser then uses at a time and under conditions which he, the purchaser, not the "owner" of the labour-power, determines (and for which he normally pays after he has consumed it). Second, the wage labour system requires the establishment of a method of measuring the labour one has purchased, for purposes of payment, commonly by introducing a second abstraction, namely labour-time. [1]

The wage is the monetary measure corresponding to the standard units of working time (or to a standard amount of accomplished work, defined as a piece rate). The earliest such unit of time, still frequently used, is the day of work. The invention of clocks coincided with the elaborating of subdivisions of time for work, of which the hour became the most common, underlying the concept of an hourly wage. [2] [3]

Wages were paid in the Middle Kingdom of ancient Egypt, [4] ancient Greece, [5] and ancient Rome. [5] Following the unification of the city-states in Assyria and Sumer by Sargon of Akkad into a single empire ruled from his home city circa 2334 BC, common Mesopotamian standards for length, area, volume, weight, and time used by artisan guilds were promulgated by Naram-Sin of Akkad (c. 2254–2218 BC), Sargon's grandson, including shekels. [6] Codex Hammurabi Law 234 (c. 1755–1750 BC) stipulated a 2-shekel prevailing wage for each 60-gur (300-bushel) vessel constructed in an employment contract between a shipbuilder and a ship-owner. [7] [8] [9] Law 275 stipulated a ferry rate of 3-gerah per day on a charterparty between a ship charterer and a shipmaster. Law 276 stipulated a 21⁄2-gerah per day freight rate on a contract of affreightment between a charterer and shipmaster, while Law 277 stipulated a 1⁄6-shekel per day freight rate for a 60-gur vessel. [10] [11] [9]

Determinants of wage rates

Depending on the structure and traditions of different economies around the world, wage rates will be influenced by market forces (supply and demand), labour organisation, legislation, and tradition. Market forces are perhaps more dominant in the United States, while tradition, social structure and seniority, perhaps play a greater role in Japan. [12] [ citation needed ]

Wage differences

Even in countries where market forces primarily set wage rates, studies show that there are still differences in remuneration for work based on sex and race. For example, according to the U.S. Bureau of Labor Statistics, in 2007 women of all races made approximately 80% of the median wage of their male counterparts. This is likely due to the supply and demand for women in the market because of family obligations. [13] Similarly, white men made about 84% the wage of Asian men, and black men 64%. [14] These are overall averages and are not adjusted for the type, amount, and quality of work done.

Effects

Corruption

It is known that the wage level of employees in the public sector affects the frequency of corruption, and that higher salary levels for public sector workers help reduce corruption. It has also been shown that countries with smaller wage gaps in the public sector have less corruption. [15]

Wages in the United States

Historical graph of real wages in the US from 1964 to 2005 US Real Wages 1964-2004.gif
Historical graph of real wages in the US from 1964 to 2005
Wages in the United States .mw-parser-output .legend{page-break-inside:avoid;break-inside:avoid-column}.mw-parser-output .legend-color{display:inline-block;min-width:1.25em;height:1.25em;line-height:1.25;margin:1px 0;text-align:center;border:1px solid black;background-color:transparent;color:black}.mw-parser-output .legend-text{} Nominal wages Adjusted for inflation wages Wages in the United States.webp
Wages in the United States
   Nominal wages

Seventy-five million workers earned hourly wages in the United States in 2012, making up 59% of employees. [16] In the United States, wages for most workers are set by market forces, or else by collective bargaining, where a labor union negotiates on the workers' behalf. The Fair Labor Standards Act establishes a minimum wage at the federal level that all states must abide by, among other provisions. Fourteen states and a number of cities have set their own minimum wage rates that are higher than the federal level. For certain federal or state government contacts, employers must pay the so-called prevailing wage as determined according to the Davis–Bacon Act or its state equivalent. Activists have undertaken to promote the idea of a living wage rate which account for living expenses and other basic necessities, setting the living wage rate much higher than current minimum wage laws require. The minimum wage rate is there to protect the well being of the working class. [17]

A heat map of the United States by living wage for a single, childless individual according to the MIT living wage calculator as of 2023 $15-15.99 $16.00-16.99 $17.00-17.99 $18.00-18.99 $19.00-19.99 $20+ Living wage by state.png
A heat map of the United States by living wage for a single, childless individual according to the MIT living wage calculator as of 2023
  $15–15.99
  $16.00–16.99
  $17.00–17.99
  $18.00–18.99
  $19.00–19.99
  $20+

In the second quarter of 2022, the total U.S. labor costs grew up 5.2% year over year, the highest growth since the starting point of the serie in 2001. [19]

Definitions

For purposes of federal income tax withholding, 26 U.S.C. § 3401(a) defines the term "wages" specifically for chapter 24 of the Internal Revenue Code:

"For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash;" In addition to requiring that the remuneration must be for "services performed by an employee for his employer," the definition goes on to list 23 exclusions that must also be applied. [20]

See also

Political science:

Related Research Articles

A trade union or labor union, often simply referred to as a union, is an organization of workers whose purpose is to maintain or improve the conditions of their employment, such as attaining better wages and benefits, improving working conditions, improving safety standards, establishing complaint procedures, developing rules governing status of employees and protecting and increasing the bargaining power of workers.

Labour laws, labour code or employment laws are those that mediate the relationship between workers, employing entities, trade unions, and the government. Collective labour law relates to the tripartite relationship between employee, employer, and union.

<span class="mw-page-title-main">Employment</span> Relationship between employee and employer

Employment is a relationship between two parties regulating the provision of paid labour services. Usually based on a contract, one party, the employer, which might be a corporation, a not-for-profit organization, a co-operative, or any other entity, pays the other, the employee, in return for carrying out assigned work. Employees work in return for wages, which can be paid on the basis of an hourly rate, by piecework or an annual salary, depending on the type of work an employee does, the prevailing conditions of the sector and the bargaining power between the parties. Employees in some sectors may receive gratuities, bonus payments or stock options. In some types of employment, employees may receive benefits in addition to payment. Benefits may include health insurance, housing, and disability insurance. Employment is typically governed by employment laws, organization or legal contracts.

Overtime is the amount of time someone works beyond normal working hours. The term is also used for the pay received for this time. Normal hours may be determined in several ways:

<span class="mw-page-title-main">Living wage</span> Minimum income to meet a workers basic needs

A living wage is defined as the minimum income necessary for a worker to meet their basic needs. This is not the same as a subsistence wage, which refers to a biological minimum, or a solidarity wage, which refers to a minimum wage tracking labor productivity. Needs are defined to include food, housing, and other essential needs such as clothing. The goal of a living wage is to allow a worker to afford a basic but decent standard of living through employment without government subsidies. Due to the flexible nature of the term "needs", there is not one universally accepted measure of what a living wage is and as such it varies by location and household type. A related concept is that of a family wage – one sufficient to not only support oneself, but also to raise a family.

<span class="mw-page-title-main">Salary</span> Form of periodic payment from an employer to an employee

A salary is a form of periodic payment from an employer to an employee, which may be specified in an employment contract. It is contrasted with piece wages, where each job, hour or other unit is paid separately, rather than on a periodic basis. Salary can also be considered as the cost of hiring and keeping human resources for corporate operations, and is hence referred to as personnel expense or salary expense. In accounting, salaries are recorded in payroll accounts.

Labour power is the capacity to do work, a key concept used by Karl Marx in his critique of capitalist political economy. Marx distinguished between the capacity to do work, i.e. labour power, and the physical act of working, i.e. labour. Labour power exists in any kind of society, but on what terms it is traded or combined with means of production to produce goods and services has historically varied greatly.

An employment contract or contract of employment is a kind of contract used in labour law to attribute rights and responsibilities between parties to a bargain. The contract is between an "employee" and an "employer". It has arisen out of the old master-servant law, used before the 20th century. Employment contracts relies on the concept of authority, in which the employee agrees to accept the authority of the employer and in exchange, the employer agrees to pay the employee a stated wage.

This article gives detailed information on the employment situation in Hong Kong.

<span class="mw-page-title-main">Piece work</span> Payment of wages per unit of output

Piece work or piecework is any type of employment in which a worker is paid a fixed piece rate for each unit produced or action performed, regardless of time.

Compensation of employees (CE) is a statistical term used in national accounts, balance of payments statistics and sometimes in corporate accounts as well. It refers basically to the total gross (pre-tax) wages paid by employers to employees for work done in an accounting period, such as a quarter or a year.

<i>Harvester case</i> Australian labour law decision

Ex parte H.V. McKay, commonly referred to as the Harvester case, is a landmark Australian labour law decision of the Commonwealth Court of Conciliation and Arbitration. The case arose under the Excise Tariff Act 1906 which imposed an excise duty on goods manufactured in Australia, £6 in the case of a stripper harvester, however if a manufacturer paid "fair and reasonable" wages to its employees, it was excused from paying the excise duty. The Court therefore had to consider what was a "fair and reasonable" wage for the purpose of the act.

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<span class="mw-page-title-main">Fair Labor Standards Act of 1938</span> United States wage law

The Fair Labor Standards Act of 1938 29 U.S.C. § 203 (FLSA) is a United States labor law that creates the right to a minimum wage, and "time-and-a-half" overtime pay when people work over forty hours a week. It also prohibits employment of minors in "oppressive child labor". It applies to employees engaged in interstate commerce or employed by an enterprise engaged in commerce or in the production of goods for commerce, unless the employer can claim an exemption from coverage. The Act was enacted by the 75th Congress and signed into law by President Franklin D. Roosevelt in 1938.

<span class="mw-page-title-main">California Labor Code</span> Collection of Californian civil law statutes

The California Labor Code, more formally known as "the Labor Code", is a collection of civil law statutes for the State of California. The code is made up of statutes which govern the general obligations and rights of persons within the jurisdiction of the State of California. The stated goal of the Department of Industrial Relations is to promote and develop the welfare of the wage earners of California, to improve their working conditions and to advance their opportunities for profitable employment."

<span class="mw-page-title-main">Indian labour law</span> Laws regulating labour in India

Indian labour law refers to law regulating labour in India. Traditionally, the Indian government at the federal and state levels has sought to ensure a high degree of protection for workers, but in practice, this differs due to the form of government and because labour is a subject in the concurrent list of the Indian Constitution. The Minimum Wages Act 1948 requires companies to pay the minimum wage set by the government alongside limiting working weeks to 40 hours. Overtime is strongly discouraged with the premium on overtime being 100% of the total wage. The Payment of Wages Act 1936 mandates the payment of wages on time on the last working day of every month via bank transfer or postal service. The Factories Act 1948 and the Shops and Establishment Act 1960 mandate 18 working days of fully paid vacation or earned leaves and 7 casual leaves each year to each employee, with an additional 7 fully paid sick days. The Maternity Benefit (Amendment) Act, 2017 gives female employees of every company the right to take 6 months' worth of fully paid maternity leave. It also provides for 6 weeks worth of paid leaves in case of miscarriage or medical termination of pregnancy. The Employees' Provident Fund Organisation and the Employees' State Insurance, governed by statutory acts provide workers with necessary social security for retirement benefits and medical and unemployment benefits respectively. Workers entitled to be covered under the Employees' State Insurance are also entitled to 90 days worth of paid medical leaves. A contract of employment can always provide for more rights than the statutory minimum set rights. The Indian parliament passed four labour codes in the 2019 and 2020 sessions. These four codes will consolidate 44 existing labour laws. They are: The Industrial Relations Code 2020, The Code on Social Security 2020, The Occupational Safety, Health and Working Conditions Code, 2020 and The Code on Wages 2019. Despite having one of the longest working hours, India has one of the lowest workforce productivity levels in the world.

The Labor policy in the Philippines is specified mainly by the country's Labor Code of the Philippines and through other labor laws. They cover 38 million Filipinos who belong to the labor force and to some extent, as well as overseas workers. They aim to address Filipino workers’ legal rights and their limitations with regard to the hiring process, working conditions, benefits, policymaking on labor within the company, activities, and relations with employees.

<span class="mw-page-title-main">Wage theft</span> Denial of wages or employee benefits rightfully owed to an employee

Wage theft is the failing to pay wages or provide employee benefits owed to an employee by contract or law. It can be conducted by employers in various ways, among them failing to pay overtime; violating minimum-wage laws; the misclassification of employees as independent contractors; illegal deductions in pay; forcing employees to work "off the clock"; not paying annual leave or holiday entitlements; or simply not paying an employee at all.

Labour law regulates the legal relationship in Bulgaria between individual workers and employees as well as between coalitions and representative bodies.

References

  1. ↑ Finley, Moses I. (1973). The ancient economy. Berkeley: University of California Press. p. 65. ISBN   9780520024366.
  2. ↑ Thompson, E. P. (1967). "Time, Work-Discipline, and Industrial Capitalism". Past and Present (38): 56–97. doi:10.1093/past/38.1.56. JSTOR   649749.
  3. ↑ Dohrn-van Rossum, Gerhard (1996). History of the hour: Clocks and modern temporal orders. Thomas Dunlap (trans.). Chicago: University of Chicago Press. ISBN   9780226155104.
  4. ↑ Ezzamel, Mahmoud (July 2004). "Work Organization in the Middle Kingdom, Ancient Egypt". Organization. 11 (4): 497–537. doi:10.1177/1350508404044060. ISSN   1350-5084. S2CID   143251928.
  5. 1 2 Finley, Moses I. (1973). The ancient economy. Berkeley: University of California Press. ISBN   9780520024366.
  6. ↑ Powell, Marvin A. (1995). "Metrology and Mathematics in Ancient Mesopotamia". In Sasson, Jack M. (ed.). Civilizations of the Ancient Near East . Vol. III. New York, NY: Charles Scribner's Sons. p.  1955. ISBN   0-684-19279-9.
  7. ↑ Hammurabi (1903). "Code of Hammurabi, King of Babylon". Records of the Past. 2 (3). Translated by Sommer, Otto. Washington, DC: Records of the Past Exploration Society: 85 . Retrieved June 20, 2021. 234. If a shipbuilder builds ... as a present [compensation].
  8. ↑ Hammurabi (1904). "Code of Hammurabi, King of Babylon" (PDF). Liberty Fund . Translated by Harper, Robert Francis (2nd ed.). Chicago: University of Chicago Press. p.  83 . Retrieved June 20, 2021. §234. If a boatman build ... silver as his wage.
  9. 1 2 Hammurabi (1910). "Code of Hammurabi, King of Babylon". Avalon Project . Translated by King, Leonard William. New Haven, CT: Yale Law School . Retrieved June 20, 2021.
  10. ↑ Hammurabi (1903). "Code of Hammurabi, King of Babylon". Records of the Past. 2 (3). Translated by Sommer, Otto. Washington, DC: Records of the Past Exploration Society: 88 . Retrieved June 20, 2021. 275. If anyone hires a ... day as rent therefor.
  11. ↑ Hammurabi (1904). "Code of Hammurabi, King of Babylon" (PDF). Liberty Fund . Translated by Harper, Robert Francis (2nd ed.). Chicago: University of Chicago Press. p.  95 . Retrieved June 20, 2021. §275. If a man hire ... its hire per day.
  12. ↑ "Student Login". Edgenuity. – Education 2020 Homeschool console, Vocabulary Assignment, definition entry for "wage rate" (may require login to view)
  13. ↑ Magnusson, Charlotta. "Why Is There A Gender Wage Gap According To Occupational Prestige?." Acta Sociologica (Sage Publications, Ltd.) 53.2 (2010): 99-117. Academic Search Complete. Web. 26 Feb. 2015.
  14. ↑ U.S. Bureau of Labor Statistics. "Earnings of Women and Men by Race and Ethnicity, 2007" Accessed June 29, 2012
  15. ↑ Asli Demirgüç-Kunt, Michael Lokshin, Vladimir Kolchin (8 April 2023). "Effects of public sector wages on corruption: Wage inequality matters". Journal of Comparative Economics. 51 (3): 941–959. doi:10.1016/j.jce.2023.03.005. hdl: 10986/35521 .{{cite journal}}: CS1 maint: multiple names: authors list (link)
  16. ↑ "Employees" as a category excludes all those who are self-employed, and this statistics only considers workers over the age of 16. U.S. Department of Labor. Bureau of Labor Statistics (2013-02-26), Characteristics of Minimum Wage Workers: 2012
  17. ↑ Tennant, Michael. "Minimum Wage The Ups & Downs." New American (08856540) 30.12 (2014): 10-16. Academic Search Complete. Web. 26 Feb. 2015.
  18. ↑ "Living Wage Calculator". livingwage.mit.edu. Retrieved 2023-10-02.
  19. ↑ Aeppel, Timothy (August 29, 2022). "North American companies send in the robots, even as productivity slumps". Reuters.
  20. ↑ USC 26 § 3401(a)

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