discuss any five major causes of wage differential
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The five causes of wage differentials are as follows:
1. Occupational Differences
2. Inter-firm Differentials
3. Regional Differences
4. Inter-Industry Differences
5. Personal Wage Differences.
1. Occupational Differences:
Occupations in an organisation 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 to 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 occupation that shapes the manpower planning in an organisation-be it an industrial organisation or educational institution.
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’s 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. Regional Differences:
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.
4. Inter-Industry Differences:
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These differences in wages surface in case of workers working in the same occupation and the same area but in different industries. These differences are the result of varying skill requirements, level of unionisation, nature of product market, ability to pay, the stage of development of an industry, etc.
5. Personal Wage Differences:
These differences 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 behind wage differentials? There are two views about it. One, in view of the principles of socialistic pattern of society in which the object of the representative. Government is to minimise inequalities, in incomes and distribution of wealth.
Two, 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 full exploitation of the national resources is yet another justification given in support of wage differentials.
a) Differences in the efficiency of the labour, which may be due to inborn quality, education, and conditions under which work may be done.
(b) The existence of non-competing groups due to difficulties in the way of the mobility of labour from low paid to high paid employments.
(c) Differences in the agreeableness or social esteem of employment.
(d) Differences in the nature of employment and occupations.