Supply and demand forces strongly influence wages, but they do not fully determine them.  What other forces can influence wages?

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pohnpei397 | College Teacher | (Level 3) Distinguished Educator

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Among the other forces that can influence wages are labor unions, simple inertia, and social factors.

Labor unions tend to push wages past where they would be if supply and demand were the only factors.  Unions manipulate the supply and demand so as to increase demand for labor and to reduce its supply.  This causes artificial increases in wages.

Inertia is another factor that sets wages.  In theory, wages should move up and down as easily as other prices do.  In practice, though, employers are somewhat reluctant to change wages and workers are reluctant to accept changes.  This is largely due to the feeling that things ought to stay the way they are.

Finally, there are social factors.  Some jobs simply have higher prestige than others.  Such jobs will be higher paid than other jobs even if the supply and demand conditions are similar.

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