CONTENTS
- INTRODUCTION OF WAGE DIFFERENTIALS
- DEFINITION OF WAGE DIFFERENTIALS
- WAGE DIFFERENTIALS
- TYPES OF WAGE DIFFERENTIALS
- IMPORTANCE OF WAGE DIFFERENTIALS
- CONCLUSION
- BIBLIOGRAPHY
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
