Friday 4 March 2016

WAGE DIFFERENTIALS

CONTENTS 

  1.   INTRODUCTION OF WAGE DIFFERENTIALS
  2.  DEFINITION  OF WAGE DIFFERENTIALS
  3.  WAGE DIFFERENTIALS
  4. TYPES OF WAGE DIFFERENTIALS
  5.   IMPORTANCE OF WAGE DIFFERENTIALS
  6.   CONCLUSION
  7. BIBLIOGRAPHY
INTRODUCTION 

Wage differential refers to differences in wage rates due to the location of company, hours of work, working conditions, type of product manufactured, or other factors. It may be the difference in wages between workers with different skills working in the same industry or workers with similar skills working in different industries or regions.

For example, wage differentials may also be used to compare wages between genders, union and non-union jobs, or wages of employees with and without college degrees.

DEFINITIONS

The difference in wages between workers with different skills in the same industry or between those with comparable skills in different industries or localities 

         Wages differ in different employments or occupations, industries and localities, and also between persons in the same employment or grade. One therefore comes across such terms as occupational wage  differentials, inter-industry, inter-firm, inter-area  or  geographical differentials and personal differentials. Wage differentials have been classified into three categories:

              Firstly, The differentials that can be attributed to imperfections  in  the employment  markets, such as the limited knowledge of workers in regard to alternative job opportunities available elsewhere; obstacles to geographical, occupational or inter-firm mobility of workers; or time lags in the adjustment of resource distribution and changes in the scope and structure of economic activities. Examples of such wage differentials are inter-industry, inter-firm, and geographical or inter-area wage differentials. 

             Secondly,   The  wage  differentials  which  originate in  social  values  and  prejudices  and  which  are deeper  and  more  persistent  than  economic  factors. Wage differentials by  sex, age, status  or  ethnic origin belong  to  this  category.

             Thirdly,  Occupational  wage  differentials, which would  exist  even  if  employment  markets  were  perfect and social prejudices were absent.

 TYPES  OF WAGE DIFFERENTIALS

1) (A)Occupational differentials
      (B) Inter-Occupational differentials               
2)   Inter-firm differentials;
3)   Inter-area or regional differentials;
4)   Inter-industry differentials;
5)   Differentials based on sex.

(A) Occupational Differentials 

         Occupations in  an   organization  widely  differ  from one another in terms of skill requirement and   the extent of requirement and the extent of  responsibility. Accordingly, wages vary from occupation. Such differences in occupations induce people/workers to undertake more challenging jobs, encourage workers to develop their skills by way of education and training. It is varying  skill requirement for different occupational  that  shapes the  manpower  planning  in an  organization-be   it an industrial  organization  or  educational institution.       

(B) Inter Occupational Differentials 

                 Inter occupational differentials may comprise  skilled, unskilled and manual wage  differentials;  non-manual and manual (white and blue-collar); and general skill differentials.  Occupational wage differentials generally follow the changes in the relative supplies of labour to various occupations.

(2)  Inter-Firm Differentials

              There are  wage differentials of workers in  different  plants in the  same  area  and  occupation.  Factors  like differences  in quality  of  labour   employed  by  different  firms, imperfections  in  the labour  market  and  differences  in  the efficiency  of equipment  and  supervision  result  in  inter-firm  wage   differentials .  Added   to these  are  differences in  technological advance, managerial  efficiency,  financial  capability,  firm’s  age and  size,  availability  of raw  material,  power   and  transport  facilities  also account for  differences  in  wages  among  firms. 

(3) Inter Area Or Regional  Differentials 

         Not only  wages  differ  among  occupations,  but  these also  differ in  case  of  workers  working  in the   same  occupation  at  different  geographical  regions.   These  differences  are  the  result  of  working   conditions  prevalent  in   different  regions  of  the  country.  For  example,  the  Central  Government   employees  serving  in  the  remote  and  disturbed  areas  like  the  North Eastern  States of  India  are  paid   additional  remuneration  in  the  form  of  the  Remote Area  Allowance. 

   Sometimes,   such wage differentials  are  used  to attract  people to serve  in  particular  regions. “The  industry mix varies from one  area  to  another, and for  this  reason  alone, the    general  average of  wages   would  be  expected  to  vary.”       

(4) Inter- Industry Differentials 

        These  differentials  arise  when  workers  in  the same  occupation  and  the  same  area   but  in  different  industries  are  paid  different   wages.  Inter-industry differentials reflect skill differentials. The industries paying  higher  wages have mostly  been industries  with  a  large  number  of  skilled workers,  While  those  paying  less  have  been industries  with a large  proportion  of  unskilled  and  semi-skilled  workers. Others  factors  influencing  inter-industry differentials  are  the extent  of  unionization, the structure  of  product   markets,  the  ability  to  pay, labour-capital  ratio,  and  the  stage  of  development  of  an  industry. 

(5) Personal Wage Differentials 

        These   arise  because  of  the  differences  in  the  personal  characteristics  (age  or  sex ) of  workers working  in the same  unit  and  occupation. Though provision  of  equal  pay  for  equal  work’ is certainly  there,  but  it  is  still  not  the  reality. Instances  are   there  when  woman   worker   is  paid   less  than  her  male  counterpart    for  doing  the  same   job. Of  course,  there  are  other   reasons  also  which  cause  wage  differentials   between  male  and   female  workers. 

   After all, What is the rationale behide wage differentials ?

     There are two views about it.

(1) In view of the principles of socialistic pattern of society in which the object of the representative Government is to minimize inequalities in incomes and distribution of wealth. 

(2) Wage differentials are  justified given  the wide differences in   demand  and  supply  of  jobs along with wide variations  in   job  requirements like skill, ability, aptitude, knowledge,  experience  and  so on. That wage differentials ensure rule   exploitation of the national resources is  yet another   justification given in support of  wage  differentials.
 
IMPORTANCE OF WAGE DIFFERENTIALS 

        Wage differentials have a great economic and social significance, for they are directly related to the allocation of the economic resources of a country, including manpower,  growth of the national income, and the pace of  economic development. Social welfare activity depends, in a large measure, on such wage differentials as will:

       Cause labour to be allocated among different occupations, industries and geographical areas in the economy in such a manner as to maximize the national product;
       Enable full employment of the resources of the economy to be attainted; and
       Facilitate the most desirable rate of economic progress.

CONCLUSION 

      The wage differentials in India tend to be higher in rural as compared with urban areas, and are higher among women than among men. The wage differential also tends to be higher for low-skilled workers. There is considerable evidence of an increase in the wage differential between 1993-94 and 1999-2000. Wage differentials are the result of occupational differentials, inter-firm differentials, regional differentials, inter-industry differentials and personal differentials. 

BIBLIOGRAPHY

PERSONNEL MANAGEMENT
            BY   C.B.MAMORIA
   (HIMALAYA  PUBLISHING HOUSE)

HUMAN RESOURCE MANAGEMENT
         BY    S.S.KHANNA
   S.CHAND & COMPANY LTD.(NEW DELHI) 

HUMAN RESOURCE MANAGEMENT
         BY   Dr. C.B.GUPTA
    SULTAN CHAND & SONS