Assumptions of the theory
- Employers are able to measure and predict in advance the marginal products of labour.
- There is free and complete competition among the employers for workers.
- There is free and, complete competition among, workers for jobs.
- labour and capital are perfectly mobile.'
- Labour and capital are fully employed.
- Labour-is homogenous.
- There is no government interference in wage determination or agreements.
- The bargaining powers of labour and management or employers are equal.