Geography & History Notes | KCSE, NECTA, ZIMSEC & GCSE

  It assumes that employers can vary the units of labour employed and this is largely true in most occupations. It assumes that workers with higher marginal physical product get higher wages than those with low marginal physical product and this is true in occupations where piece rate system applies. The government has no influence over wages in the private sector of ar. eloping countries like Uganda. Trade unions in developing countries are weak and have no or limited effect on wages Limitations of the marginal productivity theory of wages All units of labour are not homogenous and workers productivity varies. A of labour differs from another in terms of skills, education attainment physical ability. Therefore, efficiency of labour differs from worker to worker, is therefore wrong to assume that all units of labour are homogeneous. Labour tends to be immobile yet the theory assumes perfectly mobility, theory assumes perfect mobility of labour between different employments places. ...

  To large extent, the theory is inapplicable because: All units of a factor input are not homogenous. The assumption that all units of a service are homogeneous is unrealistic. Fertility of land, for example, differ from one piece of land to another. Likewise, efficiency of labour differs worker to worker. It is therefore, not correct to assume that the different factor units of the same service are homogeneous. Factors are not perfectly mobile. The theory assumes perfect mobility of factors as between different employments and places. In reality, factors are mainly immobile. There is no automatic movement of factor units from one industry or place to another. Perfect competition does not exist in true market situation. Perfect competition does not exist in the factor and product markets. What is in existence is imperfect competition. This leads to exploitation of factors by being paid much lower than their marginal productivity. Factors of production are not fully employed. The t...