Wages Fund Doctrine

Discipline: Economics

A precept held by the classical school of economists, wages fund doctrine states that an employer uses a fund of money, or fixed amount of capital, to pay workers; so, if employees demand higher wages, unemployment of some workers will be necessary.

Wages fund doctrine was also extended to a macroeconomic scale, but was later criticized on the grounds that labor rates were determined by supply and demand.

Also see: classical macroeconomic model

Source:
F W Taussig, Wages and Capital (London, 1896)

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