One of the most important aspects of a job for most workers is the wage it pays. Wages allow workers to make a living from their labor. They also provide incentives to be productive and loyal to an employer. In a broader sense, the wages workers earn fuel the economy.


For workers, wages are a primary source of income, along with smaller sources like government aid and investment income. Wages from work pay for essentials, such as rent, a mortgage, food and utility bills. Workers who earn high wages can afford more expensive lifestyles than those who earn a lower wage. Minimum wage laws ensure that all workers earn enough to pay for the basics, and that employers can't take advantage of workers.


To employers, wages are an important tool for retaining workers. Low wages will save money on payroll, but a more competitive wage will give workers fewer reasons to leave for a job elsewhere. Wages provide a means of reward, such as when an employer gives a raise based on a performance evaluation, or issues a performance bonus. Employees who earn a reasonable wage are more likely to feel valued by an employer, which means that wages also contribute to workplace morale.

Spending Power

Wages play a major role in the economy by giving workers spending power. This refers not only to the money workers earn that they spend on necessities, but also the money they save or use in the short term for consumer goods, recreation, travel and investing. Workers' wages create jobs elsewhere by supporting manufacturers, retailers, service providers and financial institutions that help workers manage their wealth.


Wages are also a source of tax revenue for governments. The more workers earn, the higher their taxable income and tax rate. Unemployed taxpayers must claim their unemployment benefits as income, but the limits on unemployment benefits mean that unemployed individuals pay less in state and federal taxes than those who earn a steady wage. Higher wages, as occur in competitive industries where workers are in high demand, boost government revenue and provide more funding for services and new projects.