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What determines the distrbution of income between wages and profits - Essay Example

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Some of these expenses are - the production cost, marketing cost, and other sundry expenditure of fixed nature such as electricity, water supply and statutory taxes. The expenditure on wages…
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What determines the distrbution of income between wages and profits
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What determines the distrbution of income between wages and profits

Download file to see previous pages... Consequently, the wages paid to the workers in the cinema theatre would reduce. An opposite scenario in this context would be that if the public transport is privatized, the wages paid to the bus conductors would possibly increase.
2. The bargaining power of the workers is another significant factor that plays a role in the determination of distribution of income between wages and profits. The point to be noted here is that bargaining power of the work force can be more important than their productivity.
3. Profits not only depend on the macro factors such as the country’s economy but they also depend on the cost of production which can be company/industry specific. For instance, some companies who believe in excellence would spend a lot on innovation, resulting into low cost of production and high profits. This could also result into high wages.
4. The wages paid would also depend on the size of the company and industry. If the company is growing in size, the wages paid would be high; similarly wages are of growing nature in sunrise industries. Companies who have maintained oligopoly in the market can also afford to pay high wages.
5. Fields such as Information technology and Finance are of revolutionary and innovative nature, so we find wages to be very high in these fields. Similarly companies in any industry such as biotechnology, weapons manufacturing and aerospace that are of innovative nature can afford to pay high wages to the workers.
6. Another important factor is the distinction between skilled and unskilled workers. Skilled workers certainly get paid more than unskilled workers. The point to be noted here is that skilled workers enable the company to make more profits.
7. Referring to the above point again, we can also conclude that skilled/unskilled workers working in the specialty and niche areas will be paid more than ...Download file to see next pagesRead More
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