1. The wage fund theory advocated by John Stuart Mill assumes that the supply of labor is fixed and demand for labor consists of a fixed sum determined by capitalist employers, with demand determined by the size of the wage fund. 2. The standard of living theory advocated by Karl Marx assumes that wages should allow workers to support themselves and their families and live comfortably according to societal standards. 3. The bargaining theory proposed by John Davidson assumes that wages are determined by the relative bargaining power of employers and employees.

1. “Theories of Compensation”

2. 1.The theory was advocated by John Stuart Mill as a supplementary to subsistence theory. It assumed that the supply of labor at any moment of time is fixed and the demand consisted of a fixed sum determined by the intentions of the capitalist employers. Here demand is determined by the size of the fund. Surplus Value Theory Efficiency Wage Theory Wage Fund Theory Bargaining Theory

3. 2. This theory was advocated by Karl Marx on the assumption that the GNP influences the standard of living and therefore the workers should be paid according to that standard of living, so that they can support the self and the family and live comfortably in a society. Standard of Living Theory Efficiency Wage Theory Expectancy Wage Theory Supply and Demand Theory

4. 3. This theory was propounded by John Davidson on the assumption that the wages are determined on the basis of the relative bargaining power of the two parties, the employer and the employees. Subsistence Theory Surplus Value Theory Efficiency Wage Theory Bargaining Theory

5. 4. This theory was propounded by Adam Smith and David Ricardo based on the assumption that labor is a principal cause of increasing productivity and in the long run wages are necessary to maintain a worker and his family. It suggests that the amount paid to the workers should meet their basic needs. Expectancy Theory Supply and Demand Theory Subsistence Theory Efficiency Wage Theory

6. 5. This theory work on the demand and supply conditions affecting the labor pricing. If the demand is more than the supply of workforce, the expected compensation will be high and vice-versa. Expectancy Wage Theory Supply and Demand Theory Standard of Living Theory Surplus Value Theory

7. 6. This is a motivational theory which helps to choose that behavior which can yield the most satisfactory exchange. This theory argues that the employees have their own expectations and they evaluate their behavior in relation to what they are being paid against their expectation of their worth. Expectancy Theory Efficiency Theory Subsistence Theory Bargaining Theory

8. 7. This theory assumes that an employer can get increased efficiency (higher productivity) from the employees and reduce the cost per unit by paying higher wages to the employees. According to this theory higher wages and productivity of the employees are directly linked to each other. Wage Fund Theory Surplus Value Theory Standard of Living Theory Efficiency Wage Theory

9. ANSWERS !!! 1. (C) Wage Fund Theory 2. (A) Standard of Living Theory 3. (D) Bargaining Theory 4. (C) Subsistence Theory 5. (B) Supply and Demand Theory 6. (A) Expectancy Theory 7. (D) Efficiency Wage Theory