What equals the real wage paid to each worker?

The real wage paid to each worker is best quantified by the marginal product of labor (MPL). This concept stems from the theory of production, which explains that the MPL represents the additional output generated by employing one more unit of labor, holding all other inputs constant. Therefore, the real wage reflects the value of the additional output that a worker can produce, translating economic productivity into compensation.

Real wages are influenced by the efficiency and productivity of labor. If the MPL increases, it typically indicates that workers are producing more output per unit of labor input, which allows firms to offer higher wages based on the increased value created by each additional worker. Thus, the MPL serves as a crucial determinant of the wages in a competitive labor market, aligning the remuneration with the contribution each worker makes to the overall production process.

This understanding of the relationship between labor productivity and wages is fundamental in macroeconomic theory, demonstrating how labor markets regulate compensation through the value of output produced.