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Stolper Samuelson's Wage Theory Analysis

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Next, is on trade unions and strike impacts on wages. According to Hicks, the wage of workers in the presence of unions which prepared to do a strike, depends on the strike estimated duration. The longer the expected length of strike, the higher the wage business willing to compromise in the absence of union strike. The relationship between wage business willing to concede and the duration of the strike is represented by concession curve (Flatau, 2002).
Meanwhile from the view of the union, the more extended the strike duration, the larger the income loss and probability of a lose in job. The relationship between wage loss and the duration of the strike is represented by union resistance curve (Flatau, 2002). The highest salary union can bargain …show more content…

The theorem showed the relationship between wages and trade by using robust mathematics. It has concluded that, if tariff was abolished on labour-intensive goods, it would reduce wages greater than prices, making workers losing out, even if the whole economy is improving (The Economist, 2016).
How Adam Smith’s Theory of Wages still relevant today.
The content of wage theory presented by Smith is still relevant in today’s economic literature in certain ways, nevertheless, the theory also receives its fair share of criticisms.
Smith believed that wage is determined in the market through supply and demand for labour; this theory is still widely use today by economists to explain wage determination in a simple economy. However, Smith failed to provide a conclusive, definitive theory of wages and there was no detailed analysis on the demand and supply of labour. There were also lack of consistency in Smith’s theoretical pattern (Pen, Kleinsorge, Boulding, …show more content…

This includes the wage determination, wage-fund model, invisible hand, subsistence wage theory and bargaining theory. The evolution of wages theory and contributions were also discussed from the Classical school, Neoclassical school and towards the Modern Economics. Nevertheless, it can be observed that several of Smith’s wage theory were subject to heavy criticisms and discredited by new economists. Despite that, a number of Smith’s wage concepts went on to form core fundamentals of contemporary economics, which are still widely use in today’s wage literatures. It cannot be denied that the framework of the society during his time is completely different with the present era; nonetheless, Smith’s perspectives on theory analysis are still capable of inspiring economists in the 21st

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