A wage is monetary compensation paid by an employer to his employee for work done. A wage is therefore the combination of salary, bonus, and employee benefits (such as stock shares). The dollar amount received per hour is called minimum wage, and the purchasing power of amount received is called real wage (in other words, real wage is nominal wage adjusted for inflation).
The higher the productivity of the worker, the higher the wage. The productivity can be attributed to more capital, better technology and workers with advanced skills. Countries such as Luxembourg and Switzerland have the highest average wages as of 2018. These wages are higher there because the workers are very productive and experienced.
Wages are determined by the point where MRC = MRP in both competitive and monopsonistic markets. But the wages are different in both markets; competitive markets have higher wages than monopsonistic markets.
In perfect competition, there are many small buyers and none can influence the market. The supply curve is horizontal and equal to the marginal cost curve. The graph would look something like this:
In a monopsony, there is one employer who is able to lower the price of the resource. The wages paid are lower for a smaller amount of labor. By reducing the cost of their labor and selling their products at a higher price than that of competitive market, a company in this type of market can make a lot of profit. The graph would look like this:
So, if you want to earn a very high wage, you would need to select a job that is in a competitive market, become very skilled in that job, and work in a location where employees are compensated well for productivity.
This is a great post explaining wages, something that is very important for us to understand especially when learning about monopsonies. You explain how wages can differ depending on the market, whether it is competitive or monopsonistic. If wages are applied in a competitive market, then most laborers are going to get a higher wage because they are compensated fairly for their productivity. In a monopsony however, there is only one single employer that gets to decide wages, which means jobs are scarce and workers will be willing to work for less than their productivity entitles them too.
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