Criticisms (Limitations)   of the marginal productivity   theory of wages (Labour)

Criticisms (Limitations)   of the marginal productivity   theory of wages (Labour)

  1. It  assumes  no government  intervention  yet  governments   especially   in  developing    countries, being   the  major   employers   interfere   in  the  labour  markets   by  fixing   the  wages   paid   to  the workers.
  2. It   assumes perfect   mobility of labour yet there exists   high   levels   of   geographical and occupational   immobility which exists in the labour markets.
  3. Most employers do not have enough information to assess the marginal productivity   of their workers.
  4. It is not easy for workers to determine their marginal productivity as the theory assumes.
  5. The theory assumes conditions of perfect competition which does not exist in the real world.
  6. Units of labour are not homogenous as the theory assumes. This is because of the differences  in educational   levels, abilities and skills.
  7. It is very difficult to measure the marginal productivity of labour as an individual factor.  This is because marginal product is as a result of all factors of production.
  8. The  theory fails  to put  into account  the exploitative habits of employers which  makes   them  to under  pay their  workers  below  the value  of their marginal  product.
  9. The bargaining power varies between employers and employees due to differences  in bargaining skills and qualities.
  10. It does not consider the high  levels of unemployment  and  underemployment   which   tend  to force the workers  to accept  wages  even below  their marginal  product.
  11. The theory assumes free and fair competition among the workers for jobs yet there is a lot of discrimination in the labour market based on sex, religion, tribe, political differences   etc.
  12. The theory is irrelevant under  conditions  of full  employment  where  there  is no  room  for  the extra  worker to  add on to the total output.
  13. Marginal productivity change over time due to economies and diseconomies of scale. Therefore it can lead to instabilities in wages if it is used as a basis of wage  determination.
  14. At times wages are greater than the marginal productivity due to pressure  from   the trade unions.
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