Input market of human resources or labor is the sum of demand and supply necessary for the production process. However, the utilization of labor will depend on the extent or absence of the production process. To produce quality goods and services, companies need a highly qualified workforce as well.
Wages is the remuneration received by households on the transfer and utilization of production factors to the production process. Wages paid to the form of money, goods, or public facilities. The provision is intended to wage labor is making a decent living.
Establishment of labor wage rates can be explained as follows.
a. The theory of normal wages. According to David Ricardo, the normal wage theory also called theory of natural wages or natural wage, stating that the wages given in accordance with the company’s ability and based on the cost of living of workers. Competition led to wage labor provided will decrease.
b. Iron wage theory. According to the school of socialist Ferdinand Lasalle, that to obtain maximum benefit the company will hit the lowest possible wage. As a result, wages can only be to meet the needs of everyday life. To overcome this, encouraged workers to form unions.
c. Wages fund theory. According to John Stuart Mill, high or low wages depends on the availability of the amount of capital used for the payment of wages. Number of labor supply will cause wage rates to be low, as well as corporate profits decline the wage rate will go down.
d. Wage theory of ethics. According to the Utopians, wages should be able to encourage workers to live decent lives. Moreover, this theory also suggests the company to provide benefits to employees.