Wages - are they a fixed cost or a variable cost within economics?

Answer 1

Variable. Any thing that changes is variable.
Rent at $1,000 a month is fixed. It is the same every month. Utilities are variable; income taxes are variable. Building insurance is usually fixed; however, unemployment insurance is variable, but over a period of time, based upon claims.

Answer 2

Well, it depends!

If you pay your wages according to the quantity you produce, then they are variable.

If you pay your wages according to anything else, like per hour, then they are fixed.

However, it is rather likely that you will hire more people the quantity you produce, so your entire wage bill will rise with quantity.

The division between fixed and variable costs are not as clear cut as our text books would like to make them out to be. Fixed costs are simply a very slow version of variable costs. At every 100 units, you could imagine a firm purchasing 10 square foot of floor space, even though rents are supposedly fixed costs (and they are from 1 to 100 units). The division between fixed and variable costs is just a way to abstract from two different types of situations.

Answer 3

Wages are the only cost that is always variable (short and long-run). All other cost, in the short-run, are fixed. But, all cost are variable in the long-run.

To get a good picture of this, think of the ATC curve. It has a "U" shape. You know why? Because, at first, the fixed cost are the majority of cost, however, at most-levels of output, average fixed cost decrease with level of output. This is common sense because AFC=FC/Q when Q gets greater and FC stays the same, the afc has to get smaller. But, you may ask, why do fix cost increase at very high quantities? Because, in the LONG-RUN no cost are fixed. This higher AFC, along with variable cost cause the upward slope of the ATC in the long run!