A 9 page paper. This paper begins by explaining the neoclassical paradigm or perspectives about the labor market and includes comments on more recent neoclassical theories. The next section discusses Marx's theory of value regarding labor, labor power and exchange. The last section summarizes the differences and similarities between the two perspectives. Bibliography lists 6 sources.
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as the point of reference for labor markets (Darrouzet-Nardi, 2008). The general perspective is that wages should be equal, a premise that is based on what would be considered perfect
competition (Darrouzet-Nardi, 2008). Along with perfect competition, there also needs to be a homogeneity of workers (Darrouzet-Nardi, 2008). In the neoclassical perspective, there are three major arguments that have
been used to explain the vast differences in wages that we are all cognizant of. The first is the Theory of equalizing differences, which basically says wages have to do
with the intrinsic value of different occupations (Darrouzet-Nardi, 2008). Different responsibilities and skills are compensated differently according to the perceived intrinsic importance of the required traits and skills for a
specific job (Darrouzet-Nardi, 2008). This is referred to as compensatory differences and is directly linked to Adam Smiths ideas (Darrouzet-Nardi, 2008). The Human Capital theory explains the differences in
wages as having to do with productivity as well as the value of the aggregate knowledge, training, skills, education, etc. that each person possesses (Darrouzet-Nardi, 2008). Thus, the more knowledge,
etc. that an individual possesses, the higher the wage should be. As this author puts it: wages are paid on the basis of the marginal product of labor. "Human
capital disparity transfers into variable productivity. Therefore it follows that workers earn different wages" (Darrouzet-Nardi, 2008). The fact that individuals with more education and training do, in fact, almost always
earn more than those who do not have that education and training is observable in most labor markets. The Efficiency Wage theory suggests that wage differentials are related to
the rate of unemployment (Darrouzet-Nardi, 2008). This is based on the equilibrium wage and when wages are higher than the equilibrium wage and has frequently been applied to developing countries