What was the 'Iron Law of Wages' proposed by David Ricardo?
Understand the Problem
The question is asking for an explanation of the 'Iron Law of Wages' as proposed by economist David Ricardo. This law refers to the theory regarding the relationship between wages and the standard of living of workers.
Answer
Real wages trend towards sustaining workers' minimum needs.
The Iron Law of Wages, proposed by David Ricardo, asserts that in the long run, real wages tend to gravitate towards the minimum level necessary to sustain the life of the worker.
Answer for screen readers
The Iron Law of Wages, proposed by David Ricardo, asserts that in the long run, real wages tend to gravitate towards the minimum level necessary to sustain the life of the worker.
More Information
The Iron Law of Wages was named to emphasize the rigid, unchanging nature of this economic concept, suggesting a natural equilibrium is reached where wages cannot rise significantly above subsistence levels due to factors like population growth.
Tips
A common mistake is misunderstanding the 'iron' aspect as meaning wages can never change, when it actually implies they will naturally return to this subsistence level even if they fluctuate in the short term.
Sources
- Iron law of wages - Wikipedia - en.wikipedia.org
- Subsistence theory | Definition, David Ricardo, Iron Law of Wages ... - britannica.com
- Modern History Sourcebook: David Ricardo: The Iron Law of Wages ... - origin-rh.web.fordham.edu
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