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From Wikipedia, the free encyclopedia

A wage is part of an economic conversion transaction paid by an employer to an employee as value in exchange for any number of the employee's assets that may include the employee's money, time, labor, resources, and thought. An employee's performance qualities may also serve to increase or take away from the employee's base wage.

Thus a wage payment may contain any one or both of the following aspects:

  1. Base wage payment: This transfers fair market value to the employee to pay off the debt created by the employer's use of the employee's net investment of assets.
  2. Premium wage payment: This transfers added value to the employee and is given as an incentive or as a reward, as follows:
    • compensatory pay such as bonuses, paid or unpaid time off, or other employee benefits such as insurance or child care.
    • remunerative pay such as cash or non-cash rewards and tips.

In some jurisdictions, certain types of premium pay may represent taxable gain to the employee, and may be specifically defined under tax codes as "wages". Income tax authorities have imposed frivolous argument penalties against some who claim that their "wages" are not taxable. Employers are often charged with the responsibility to withhold certain percentages from the employee's "wages" for income tax purposes..

Employee's may also have their employer redirect some portion of their wage to a third party (i.e. to pay off a loan).

Wages are part of the expenses that are involved in running a business.

Payment by wage contrasts with the following payment types:

  • salary: pay amounts arranged at steady intervals (i.e. weekly or monthly) regardless of hours worked,
  • commission: pay based upon individual performance,
  • compensation: pay based on performance of the company as a whole.
  • tips or gratuity: pay given directly by clients.
  • employee benefits that are non-monetary forms of compensation.

Since wage labour is the predominant form of work, the term "wage" sometimes refers to all forms (or all monetary forms) of payment made to an employee.

Origins and necessary components

Wage labour involves the exchange of money for time spent at work (the latter quantity is termed labor power by Marx and subsequent economists). As Moses I. Finley lays out the issue in The Ancient Economy:

The very idea of wage-labour requires two difficult conceptual steps. First it requires the abstraction of a man's labour from both his person and the product of his work. When one purchases an object from an independent craftsman ... one has not bought his labour but the object, which he had produced in his own time and under his own conditions of work. But when one hires labour, one purchases an abstraction, labour-power, which the purchaser then uses at a time and under conditions which he, the purchaser, not the "owner" of the labour-power, determines (and for which he normally pays after he has consumed it). Second, the wage labour system requires the establishment of a method of measuring the labour one has purchased, for purposes of payment, commonly by introducing a second abstraction, namely labour-time.[1]

The wage is the monetary measure corresponding to the standard units of working time (or to a standard amount of accomplished work, defined as a piece rate). The earliest such unit of time, still frequently used, is the day of work. The invention of clocks coincided with the elaborating of subdivisions of time for work, of which the hour became the most common, underlying the concept of an hourly wage.[2][3]

Wages were paid in the Middle Kingdom of ancient Egypt,[4] ancient Greece,[5] and ancient Rome.[5]

Determinants of wage rates

Depending on the structure and traditions of different economies around the world, wage rates will be influenced by market forces (supply and demand), labour organisation, legislation, and tradition. Market forces are perhaps more dominant in the United States, while tradition, social structure and seniority, perhaps play a greater role in Japan.[6][citation needed]

Wage differences

Even in countries where market forces primarily set wage rates, studies show that there are still differences in remuneration for work based on sex and race. For example, according to the U.S. Bureau of Labor Statistics, in 2007 women of all races made approximately 80% of the median wage of their male counterparts. This is likely due to the supply and demand for women in the market because of family obligations.[7] Similarly, white men made about 84% the wage of Asian men, and black men 64%.[8] These are overall averages and are not adjusted for the type, amount, and quality of work done.

Wages in the United States

Historical graph of real wages in the US from 1964 to 2005.
Historical graph of real wages in the US from 1964 to 2005.

Seventy-five million workers earned an hourly wage in the United States in 2012, making up 59% of employees.[9] In the United States, wage rates for most workers are set by market forces, or else by collective bargaining, where a labor union negotiates on the workers' behalf. The Fair Labor Standards Act establishes a minimum wage at the federal level that all states must abide by, among other provisions. Fourteen states and a number of cities have set their own minimum wage rates that are higher than the federal level. For certain federal or state government contacts, employers must pay the so-called prevailing wage as determined according to the Davis-Bacon Act or its state equivalent. Activists have undertaken to promote the idea of a living wage rate which account for living expenses and other basic necessities, setting the living wage rate much higher than current minimum wage laws require. The minimum wage rate is there to protect the well being of the working class.[10]

Legal Definitions

For purposes of federal income tax withholding, 26 U.S.C. § 3401(a) defines the term "wages" specifically for chapter 24 of the Internal Revenue Code:

"For purposes of this chapter, the term “wages” means all remuneration (other than fees paid to a public official) for services performed by an employee for his employer, including the cash value of all remuneration (including benefits) paid in any medium other than cash;"

Besides applying the definition to all remuneration (pay given as gratuity), and that the gratuity be for "services performed by an employee for his employer," the definition goes on to list 23 exclusions that must also be applied.[11]

This is in contrast with the base pay returned under the conversion transaction[12] to cover the employee’s net investment (fair market value in the position, less any premium).

See also

Political science:


  1. ^ Finley, Moses I. (1973). The ancient economy. Berkeley: University of California Press. p. 65. ISBN 9780520024366.
  2. ^ Thompson, E. P. (1967). "Time, Work-Discipline, and Industrial Capitalism". Past and Present. 38 (38): 56–97. doi:10.1093/past/38.1.56. JSTOR 649749.
  3. ^ Dohrn-van Rossum, Gerhard (1996). History of the hour: Clocks and modern temporal orders. Thomas Dunlap (trans.). Chicago: University of Chicago Press. ISBN 9780226155104.
  4. ^ Ezzamel, Mahmoud (July 2004). "Work Organization in the Middle Kingdom, Ancient Egypt". Organization. 11 (4): 497–537. doi:10.1177/1350508404044060. ISSN 1350-5084.
  5. ^ a b Finley, Moses I. (1973). The ancient economy. Berkeley: University of California Press. ISBN 9780520024366.
  6. ^ "Student Login". Edgenuity. – Education 2020 Homeschool console, Vocabulary Assignment, definition entry for "wage rate" (may require login to view)
  7. ^ Magnusson, Charlotta. "Why Is There A Gender Wage Gap According To Occupational Prestige?." Acta Sociologica (Sage Publications, Ltd.) 53.2 (2010): 99-117. Academic Search Complete. Web. 26 Feb. 2015.
  8. ^ U.S. Bureau of Labor Statistics. "Earnings of Women and Men by Race and Ethnicity, 2007" Accessed June 29, 2012
  9. ^ "Employees" as a category excludes all those who are self-employed, and this statistics only considers workers over the age of 16. U.S. Department of Labor. Bureau of Labor Statistics (2013-02-26), Characteristics of Minimum Wage Workers: 2012
  10. ^ Tennant, Michael. "Minimum Wage The Ups & Downs." New American (08856540) 30.12 (2014): 10-16. Academic Search Complete. Web. 26 Feb. 2015.
  11. ^ USC 26 § 3401(a)
  12. ^ USC 26 U.S.C. § 1258(c)(1) and (2)(D)

Further reading

  • Galbraith, James Kenneth. Created Unequal: the Crisis in American Pay, in series, Twentieth Century Fund Book[s]. New York: Free Press, 1998. ISBN 0-684-84988-7

External links

This page was last edited on 26 October 2020, at 20:59
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