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A wage is monetary compensation (or remuneration, personnel expenses, labor) paid by an employer to an employee in exchange for work done. Payment may be calculated as a fixed amount for each task completed (a task wage or piece rate), or at an hourly or daily rate (wage labour), or based on an easily measured quantity of work done.

Remuneration is the pay or other compensation provided in exchange for an employee's services performed. A number of complementary benefits in addition to pay are increasingly popular remuneration mechanisms. Remuneration is one component of reward management.

Wage labour Relationship where a worker sells labour to an employer

Wage labour is the socioeconomic relationship between a worker and an employer, where the worker sells their labour power under a formal or informal employment contract. These transactions usually occur in a labour market where wages or salaries are market-determined.


Wages are part of the expenses that are involved in running a business.

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.

Salary remuneration paid by an employer to an employee

A salary is a form of 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. From the point of view of running a business, salary can also be viewed as the cost of acquiring and retaining human resources for running operations, and is then termed personnel expense or salary expense. In accounting, salaries are recorded on payroll accounts.

Commissions are a form of variable-pay remuneration for services rendered or products sold. Commissions are a common way to motivate and reward salespeople. Commissions can also be designed to encourage specific sales behaviors. For example, commissions may be reduced when granting large discounts. Or commissions may be increased when selling certain products the organization wants to promote. Commissions are usually implemented within the framework on a sales incentive program, which can include one or multiple commission plans.

Gratuity sum of money customarily tendered to service sector workers

A gratuity is a sum of money customarily given by a client or customer to a service worker in addition to the basic price. Tipping is commonly given to certain service sector workers for a service performed, as opposed to money offered for a product or as part of a purchase price. Depending on the country or location, it may or may not be customary to tip servers in bars and restaurants, taxi drivers, hair stylists and so on. The exchange is typically irreversible, differentiating it from the reward mechanism of a placed order, which can be refunded.

Origins and necessary components

Wage labour involves the exchange of money for time spent at work (the latter quantity is termed labor power by Marx and subsequent economists). As Moses I. Finley lays out the issue in The Ancient Economy :

Karl Marx German philosopher, economist, historian, sociologist, political theorist and journalist

Karl Marx was a German philosopher, economist, historian, sociologist, political theorist, journalist and socialist revolutionary.

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]

Hour unit of time

An hour is a unit of time conventionally reckoned as ​124 of a day and scientifically reckoned as 3,599–3,601 seconds, depending on conditions.

Wages were paid in the Middle Kingdom of ancient Egypt, [4] ancient Greece, [5] and ancient Rome. [5]

Middle Kingdom of Egypt period in the history of ancient Egypt between about 2000 BC and 1700 BC

The Middle Kingdom of Egypt is the period in the history of ancient Egypt following a period of political division known as the First Intermediate Period. The Middle Kingdom lasted from around 2050 BC to around 1710 BC, stretching from the reunification of Egypt under the reign of Mentuhotep II of the Eleventh Dynasty to the end of the Twelfth Dynasty. The Eleventh Dynasty ruled from Thebes and the Twelfth Dynasty ruled from el-Lisht. Some scholars also include the Thirteenth Dynasty of Egypt wholly into this period as well, in which case the Middle Kingdom would finish around 1650, while others only include it until Merneferre Ay around 1700 BC, last king of this dynasty to be attested in both Upper and Lower Egypt. During the Middle Kingdom period, Osiris became the most important deity in popular religion. The Middle Kingdom was followed by the Second Intermediate Period of Egypt, another period of division that involved foreign invasions of the country by the Hyksos of West Asia.

Ancient Greece Civilization belonging to an early period of Greek history

Ancient Greece was a civilization belonging to a period of Greek history from the Greek Dark Ages of the 12th–9th centuries BC to the end of antiquity. Immediately following this period was the beginning of the Early Middle Ages and the Byzantine era. Roughly three centuries after the Late Bronze Age collapse of Mycenaean Greece, Greek urban poleis began to form in the 8th century BC, ushering in the Archaic period and colonization of the Mediterranean Basin. This was followed by the period of Classical Greece, an era that began with the Greco-Persian Wars, lasting from the 5th to 4th centuries BC. Due to the conquests by Alexander the Great of Macedon, Hellenistic civilization flourished from Central Asia to the western end of the Mediterranean Sea. The Hellenistic period came to an end with the conquests and annexations of the eastern Mediterranean world by the Roman Republic, which established the Roman province of Macedonia in Roman Greece, and later the province of Achaea during the Roman Empire.

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), 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. [6] [ citation needed ]

Supply and demand economic model of price determination in microeconomics

In microeconomics, supply and demand is an economic model of price determination in a market. It postulates that, holding all else equal, in a competitive market, the unit price for a particular good, or other traded item such as labor or liquid financial assets, will vary until it settles at a point where the quantity demanded will equal the quantity supplied, resulting in an economic equilibrium for price and quantity transacted.

United States Federal republic in North America

The United States of America (USA), commonly known as the United States or America, is a country comprising 50 states, a federal district, five major self-governing territories, and various possessions. At 3.8 million square miles, the United States is the world's third or fourth largest country by total area and is slightly smaller than the entire continent of Europe's 3.9 million square miles. With a population of over 327 million people, the U.S. is the third most populous country. The capital is Washington, D.C., and the most populous city is New York City. Most of the country is located contiguously in North America between Canada and Mexico.

Social structure sociological classification of human societies according to their social characteristics

In the social sciences, social structure is the patterned social arrangements in society that are both emergent from and determinant of the actions of the individuals. On the macro scale, social structure is the system of socioeconomic stratification, social institutions, or, other patterned relations between large social groups. On the meso scale, it is the structure of social network ties between individuals or organizations. On the micro scale, it can be the way norms shape the behavior of individuals within the social system.

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. [7] Similarly, white men made about 84% the wage of Asian men, and black men 64%. [8] These are overall averages and are not adjusted for the type, amount, and quality of work done.

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.

Seventy-five million workers earned hourly wages in the United States in 2012, making up 59% of employees. [9] 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. [10]


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. [11]

See also

Political science:

Related Research Articles

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Employment is a relationship between two parties, usually based on a contract where work is paid for, where one party, which may be a corporation, for profit, not-for-profit organization, co-operative or other entity is the employer and the other is the employee. Employees work in return for payment, which may be in the form of an hourly wage, by piecework or an annual salary, depending on the type of work an employee does or which sector they are working in. Employees in some fields or sectors may receive gratuities, bonus payment or stock options. In some types of employment, employees may receive benefits in addition to payment. Benefits can include health insurance, housing, disability insurance or use of a gym. Employment is typically governed by employment laws, regulations 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:

Living wage Minimum income necessary to meet basic needs

A living wage is the minimum income necessary for a worker to meet their basic needs. 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. 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.

Labour power key concept used by Karl Marx in his critique of capitalist political economy

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Wage regulation refers to attempts by a government to regulate wages paid to citizens.

Piece work employment system where the worker is paid according to the number of units produced

Piece work 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>

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Minimum wage law is the body of law which prohibits employers from hiring employees or workers for less than a given hourly, daily or monthly minimum wage. More than 90% of all countries have some kind of minimum wage legislation.

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Fair Labor Standards Act of 1938 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 most 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.

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Wages and salaries are the remuneration paid or payable to employees for work performed on behalf of an employer or services provided. Normally, an employer is not permitted to withhold the wages or any part thereof, except as permitted or required by law. Employers are required by law to deduct from wages, commonly termed "withhold", income taxes, social contributions and for other purposes, which are then paid directly to tax authorities, social security authority, etc., on behalf of the employee. Garnishment is a court ordered withholding from wages to pay a debt.

Compensation and benefits (C&B) is a sub-discipline of human resources, focused on employee compensation and benefits policy-making. While compensation and benefits are tangible, there are intangible rewards such as recognition, work-life and development. Combined, these are referred to as total rewards. The term "compensation and benefits" refers to the discipline as well as the rewards themselves.

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.

Wage theft is the denial of wages or employee benefits rightfully owed to an employee. 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", or simply not paying an employee at all.

The tipped wage is base wage paid to an employee that receives a substantial portion of their compensation from tips. According to a common labor law provision referred to as a "tip credit", the employee must earn at least the state’s minimum wage when tips and wages are combined or the employer is required to increase the wage to fulfill that threshold. This ensures that all tipped employees earn at least the minimum wage: significantly more than the tipped minimum wage.


  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 (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.
  5. 1 2 Finley, Moses I. (1973). The ancient economy. Berkeley: University of California Press. ISBN   9780520024366.
  6. "Student Login". Edgenuity. – Education 2020 Homeschool console, Vocabulary Assignment, definition entry for "wage rate" (may require login to view)
  7. 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.
  8. U.S. Bureau of Labor Statistics. "Earnings of Women and Men by Race and Ethnicity, 2007" Accessed June 29, 2012
  9. "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
  10. Tennant, Michael. "Minimum Wage The Ups & Downs." New American (08856540) 30.12 (2014): 10-16. Academic Search Complete. Web. 26 Feb. 2015.
  11. USC 26 § 3401(a)

Further reading