Question

What are the determinants of demand for labor and supply of labor? How is the equilibrium wage rate determined in a labor market? Why a janitor gets lower wage than a heart surgeon? Why wage rates of all types of labor are lower in India and Pakistan than Saudi Arabia?

Answer 1

Wages are driven by Labour market equillibrium. Different industies have different labour markets and the supply and demand forces determine the equilibrium wages rates in the respective markets.
For instance in the labour market for unskilledlabour the equillibrium wage rate will be lower than the equillibrium wage rate for skilled labourers. Since the supply of unskilled labour is proportionately lower than the supply of unskilled labour the wage rates behave differently. Therefore a heart surgeon who is highly skilled and faces a steeper demand curve and supply curve earns higher wages compared to a janitor whose demand and supply curve are relatively elastic.
The equillibrium wages in the Indian Market as compared to the equillibrium wages in Saudi Arabia beacause of denand factors of labour. The demand for labour is outweighed by the supply of labour in Indian market owing to its huge population where as the supply for labour is lower than its demand in Saudi Market and thus the existing differences in the equillibrium wages.