Criticism on marginal productivity theory of wages
The theory of marginal net product of wages has been criticized on the following grounds:
- The theory assumes that there is perfect competition, among the entrepreneurs and the wage, earners while in the real world there is no such perfect, competition.
- The theory assumes that all units of labour engaged are perfectly homogeneous but the fact is otherwise.
- The theory emphasizes on the demand side of the problem and makes a wrong assumption that the supply of labour remains constant
- It is clear now that marginal net product theory of wages is true only under certain assumed conditions. In, spite of the flaws which have been discussed above, it offers a bit satisfactory explanation of the wages,
- The productivity of labour does not only depend entirely on its own effort and efficiency but largely on the quality of the other factors of production employed especially capital.
- Labour does not know its marginal product so as to demand for a wage that is equal to its marginal productivity ,
- Governments always set minimum wages in the economy. Because, the government is always the main employer in the economy which makes it to play an active role in wage determination contrary to the theory.
- The employment of an additional unit of labour can upset the production method used by the firm. Because ,of this, a change in wages is not likely to bring an immediate change in the amount of labour employed,
- There is no free and complete competition among workers for jobs because of the discrimination that exist in the labour market.
- Labour and capital are not completely mobile as assumed by the theory. There are many barriers to occupational and Geographical mobility.