Wages Theory of Profits

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Wages Theory of Profits
The connection between profits and wages can be looked at from two points of view: (i) The sociaJists regard profits as simply deductions from the produce of the worker’s labour. According to this view, profits are not justified; because they are earned at the expense of the wage-earners. (ii) The second view is represented by Prof. Taussig. He regards profits as simply a particular kind of wages. As for the socialist view, it may be pointed out that, under perfect competition, rates of wages for the
same type of labour tend to equaJity in the same industry. The same wages are paid by the employer who eams no profits as by the one who earns high profits. The superior employer earns profits, not because he pays lower wage (this he cannot do under competition) but because. on account of his superior organising ability and uncertainty-bearing powers. he can produce at a cost lower than that of his inferior rival. Now consider Taussig’s view that profits are merely wages for a special kind of labour. “Profits,” say Taussig, “are best regarded as simply a fonn of wages.” Criticism. The position taken up by Taussig cannot be accepted. There are fundamental differences between wages and profits: (i) Profits are essentially a reward for assuming risks of business. But the labourer takes no risk. His reward or wage is primarily for the work done by him. His w;k is insignificant as compared with the risk taken by the employer

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