markets, microeconomic-theoryAccording to standard microeconomics theory both the (nominal) wages and the prices are determined by the law of demand and supply applyed to labour force and to the material goods, so apparently the real wages are determined by forces which are out of the control of the government. Suppose that a government increases the (nominal) wages (for example enforcing a sliding wage scale) then the demand of goods also increases and the price will reach a new equilibrium so that the real wages are (maybe) still the same as before. And the same argument seems to apply while trying to decrease the wages (enforcing wage control policies). So my question is: is there any way for a government to make the real wages change or are they outside the control of policymakers?
Labor is a service that is bought and traded on the market just like any other good or service. And yes a governments can certainly affect the value of wages.
For example increasing the supply of labor by decreasing immigration barriers would bring in more workers leading to decreased wages.
Removing child labor laws would increase the supply of labor and bring down wages.
Likewise wages can also be increased by governments and professional associations by placing barriers to entry into particular fields. IE to do this job, you must meet these qualifications. This decreases the supply of available labor and leads to increased wages.
Is there any way for a government to make the real wages change or are they outside the control of policymakers?
I can think of a couple of ways government can make real wages increase:
Essentially, get government out of the way and people will prosper.
All content is licensed under CC BY-SA 3.0.