Five Factors That Affect Wages and Profits

Are you looking for a career that gives a high salary or deciding what kind of business to establish? Adam Smith enumerated five factors that affect wages and profits:

  1. The agreeableness or disagreeableness of the employments

    • A job’s difficulty, cleanliness, and/or honorableness can lead to different wage and profit levels
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Defense contractors get paid a lot

  1. The difficulty and cost of learning them

    • A job that requires a high degree of techincal skill will lead to higher wages than one that is simple. This explains the high wages given to specialized IT professions, surgeons, and expert lawyers.
solution-architect

A solutions architect is a high paying job in IT

  1. The constancy or inconstancy of employment in them

    • Seasonal jobs get paid differently than non-seasonal ones
    • Here, Smith gives the general rule that “The lowest common earnings may always be considered as the earnings of the majority.”
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Seasonal labor in farming

 

  1. The small or great trust which must be reposed in those who exercise them

    • Smith gives the example of doctors whom we should trust to cure us

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  1. The probability or improbability of success in them.

    • Lotteries (chance of winning) and insurance (chance of loss) are examples. Venture capitalism and adventurous jobs are also given

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