The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Low Pay

  • Frank Wilkinson
Reference work entry


In neoclassical theory the market operates in such a way as to equate wages with the marginal product of labour. The productivity of workers is determined largely by their skill and capacity for work and as these vary between individuals so will earnings. However the workings of the market will tend to equalize efficiency-earnings, i.e. earnings ‘measured … with reference to the exertion of ability and efficiency required of the workers’ (Marshall 1952, p. 456) and consequently the wages of individuals will be proportionate to their productivity. Low pay is therefore explained by the ‘quality’ of individuals; a view expressed at its starkest by Hicks: ‘Casual labour is often badly paid, not because it gets less than it is worth, but because it is worth so appallingly little’ (Hicks 1963, p. 82).

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Frank Wilkinson
    • 1
  1. 1.