What Is the Traditional Theory of Wage Determination?

The traditional theory of wage determination states that wages for workers will be based off of supply and demand. The supply and demand would be relative to each professional, which means that the more a profession was needed, and the less workers of that profession there are, the higher the wages will be for those positions.

The traditional theory of wage determination is not the only way the wages can be determined. The theory of negotiated wages states that workers in a profession can band together and form a union. A union can negotiate wages with employers on behalf of workers to ensure that the wages are fair for the work done, regardless of supply or demand.