Wage determination As you can see above, wages are determined in an industry as prices are - by taking where the supply and demand curve meet, the point of equilibrium. The area below W e and to the left of the supply curve is the area of labour surplus. The area above W e and to the left of the demand curve is the employer surplus. Labour surplus is the workers that would have been willing to work at a lower wage than W e so are benefitting. It is the difference between the wage workers would have been willing to accept and what they are actually accepting. NB: this is NOT the same as surplus labour. Employer surplus is the difference between what firms are willing to pay workers and what they actually are paying. It is the firms that would have been willing to pay workers a higher wage than W e. The firms that are to the right of Q e are those who are not working because they h...