DIMINISHING THE DIFFERENTIA: INTER-INDUSTRY, INTRA-INDUSTRY

AND REGIONAL FACTORS

INTRODUCTION:

The right to equality is one of the six rights that have been granted to the
Indian citizens. The State shall not discriminate against any citizen on
grounds of religion, race, caste, sex, place of birth or discrimination against
any individual in respect of, any employment etc. However this particular
Right to Equality applies practically to the State owned Offices where people
with similar kind of Positions & Qualifications are given similar
compensation for similar kind of Jobs and not in the Private Job s. Thus, there
exists a lot of Inter & Intra Wage Diffrentials throughout the Industry.

Different wages paid to different workers or in different markets adjust for

differences in the jobs or in the productivity of the workers. Wage
differentials occur for many reasons. Quite often they are the result of the
personal preferences of workers. In some cases workers are willing to "buy"
leisure−time or other types of household production by taking lower wages.
Differences in job risks, education, and location are also reasons for the
persistence of wage differentials.

Wage Diffrentials that exists between the Industry are termed as Inter Wage
Diffrentials, whereas those that exist between various organization in an
industry is termed Intra Wage Diffrentials.

Wage differentials are not uniform; they manifest across diverse dimensions,
creating a mosaic of disparities that impact workers, industries, and entire
communities. Inter-industry differentials refer to the wage variations observed
between distinct sectors of the economy, where certain industries command
higher compensation due to factors such as skill demands, market conditions,
and technological advancements. Intra-industry differentials, on the other
hand, explore the wage variations within a specific sector, unraveling the
nuances that distinguish the compensation levels of workers even within the
same industry.
Moreover, the geographic footprint of wage differentials adds another layer of
complexity. Regional factors, encompassing variations in cost of living, labor
market conditions, and economic development, significantly influence the
earning potential of individuals across different areas. Understanding these
regional dynamics is crucial for policymakers, businesses, and researchers
seeking to address economic disparities and foster inclusive growth.

The comprehensive exploration of the factors that contribute to wage

differentials, aiming to shed light on strategies that can diminish these gaps.
By dissecting the interplay of inter-industry forces, intra-industry nuances,
and regional influences, As we navigate the intricate terrain of wage
differentials.

objective of the study

This study endeavors to achieve a comprehensive understanding of wage

differentials, focusing specifically on inter-industry, intra-industry, and
regional factors. The primary objectives include identifying and analyzing key
drivers of wage differentials, assessing their impacts on economic, social, and
individual levels, formulating evidence-based policy recommendations to
diminish these disparities, and promoting fair compensation practices within
and between industries. The investigation extends to regional disparities,
examining variations in wages with regard to factors such as cost of living,
economic development, and local labor market conditions. The study also
considers the global context of wage differentials, exploring international
influences, globalization, and cross-border dynamics. The scope encompasses
inter-industry analysis to understand wage differentials between distinct
sectors, intra-industry dynamics to investigate variations within specific
industries, and comparative case studies to identify best practices.
Additionally, the study assesses existing policies and regulations,
incorporating stakeholder perspectives from workers, employers,
policymakers, and industry associations. By achieving these objectives within
the outlined scope, the study aims to contribute valuable insights to academic
research, policymaking, and industry practices, ultimately fostering a more
equitable and sustainable economic landscape
THEORY OF COMPENSATING WAGE DIFFRENTIALS : BY ADAM
SMITH

 The Theory has the following assumptions

 The model of competitive labor markets implies that as long as workers

or firms can freely enter and exit the marketplace, there will be a single
wage in the economy if all jobs are alike and all workers are alike .
  All jobs are not the same. Adam Smith in 1776 argued that compensating
wage differentials arise to compensate workers for the nonwage
characteristics of jobs. It is not the wage that is equated across jobs in a
competitive market, but the “whole of the advantages and disadvantages” of
the job.

 Workers differ in their preferences for job characteristics and firms differ in
the working conditions that they offer. The theory of compensating
differentials tells a story of how workers and firms “match and mate” in the
labor market.

 E.g. Employer X: Rs. 100 per hour for, clean, safe work conditions

Employer Y: Rs 100 per hour for, dirty, noisy factory

Most workers would undoubtedly choose employer X.

If employer Y decides not to alter working conditions, it must pay wage above
Rs.100 to be competitive in the labor market.

The extra wage it must pay to attract workers is called a compensating wage
differential because the higher wage is paid to compensate workers for the
undesirable working conditions.

After the wage rise of firm Y, if both firms could obtain the quantity and quality of
works they wanted, the wage differential would be an equilibrium differential, in
the sense that there be no forces causing the differential to change

 The Compensating Wage Diffrential serves a social need by giving people

an incentive to voluntarily do dirty, dangerous, or unpleasant work or a
financial penalty on employers offering unfavorable working conditions.

 At an individual level, it serves as a reward to workers who accept

unpleasant jobs by paying them more than comparable workers in more
pleasant jobs. Those who opt for more pleasant conditions have to buy
them by accepting lower pay1.

Concept of wage differentia

1
https://ssca.org.in (INTER-INTRA-INDUSTRY-WAGE-DIFFRENTIALS)
A wage differential refers to the difference in wages or salaries between different
groups of workers, occupations, industries, or regions. Various factors contribute
to wage differentials, including education, skills, experience, job responsibilities,
and market conditions.

"wage differentia." Wage-related terms in statutes typically include references to

minimum wage, equal pay, and anti-discrimination laws. However, the specific
language and terminology can vary depending on the jurisdiction and the nature of
the legislation.

For instance, in the United States, the federal Fair Labor Standards Act (FLSA)
establishes minimum wage standards, and the Equal Pay Act prohibits wage
discrimination based on gender. In other countries, similar legislation may exist
with different wording.

(a) Based on occupation

In different industries different qualifications, degree of skill and different

degree of responsibility are required which may be basis of the difference in
wages. Such a differential is necessary for it induces a worker to under take
more demanding, more agreeable or dangerous jobs. Under the Minimum
Wages Act also different rates for different occupations are fixed in view of
section 3.

(b) Inter regional differential

Such a difference in wages are generally due to different local and geographical
conditions of a place. The rates of wages for organised sector may differ from rates
of wages fixed for unorganised sector; difference of wage scale in agriculture from
urban area is also justified.

In T.R. Sukaram v. State of Tamil Nadu, 1979 Lab. LC. 1077 (H.C. Madras), the
State Government fixed minimum rates of wages for hotel and Restaurants and for
the purpose divided the area into three zones. This was found justified in view of
special conditions of a place from other and held that section 3 of the Minimum
Wages Act itself provided for such a differential.
(c) Based on Sex

Variation in wages on the basis of sex has been although practiced frequently by
employers; it is not justified in view of the provisions of 'equal pay for equal work'
of the Directive Principles of State Policy.

(d) Based on Special Kind of Work

In National Carbon Co. (India) Ltd., (1992) 2 L.L.J. 669 (L.A.T.W.B.) workers
were allowed job premium which was variable according to the nature of the job.
The company in a scientific way evaluated the different jobs and fixed the wages
of the workers who performed the job according to; (i) skill, (ii) responsibility, (iii)
risk, (iv) tediousness, (v) unpleasantness.

(e) Based on size

The different rates of wages are sometime justified on the basis of size of industrial
establishments.

Inter industry wage differential:

Inter-industry wage differentials refer to the variations in wages or compensation

levels observed across different industries within an economy. These differences in
pay rates between industries can be influenced by various factors. Understanding
inter-industry wage differentials is essential for policymakers, researchers, and
businesses as it provides insights into the economic structure, labor market
dynamics, and the distribution of compensation across sectors. Here are key factors
contributing to inter-industry wage differentials:

Skill and Education Requirements:

Industries with higher skill and education requirements often offer higher wages.
Labor laws may reflect the need for recognizing and compensating workers based
on their qualifications and expertise.

Labor Market Demand and Supply:

Wage differentials can be influenced by the supply and demand for labor in
different industries. Industries facing a shortage of skilled workers may offer
higher wages to attract talent, while those with an oversupply may have lower
wage levels.

Industry-specific Collective Bargaining Agreements:

Collective bargaining agreements negotiated between employers and labor unions

in specific industries can lead to variations in wage levels. Industries with strong
unions may negotiate higher wages compared to sectors with weaker or no union
representation.

Occupational Hazards and Working Conditions:

Industries with higher levels of occupational hazards or challenging working

conditions may provide higher wages as a compensation incentive. Labor laws
may address safety standards and compensation for hazardous work.

Technological Advancements:

Industries that heavily invest in technology and require specialized skills may offer
higher wages. Labor laws may recognize the importance of compensating workers
for their expertise in navigating advanced technologies.

Market Competition and Profitability:

The level of competition and profitability within an industry can impact wage
differentials. Highly competitive industries may offer higher wages to attract
skilled workers, while the profitability of a sector can influence its ability to
provide competitive compensation.

Government Regulations and Minimum Wage Laws:

Labor laws, including minimum wage regulations, can contribute to wage

differentials. Industries subject to specific labor regulations or minimum wage
requirements may experience variations in compensation levels.

Globalization and Trade Dynamics:

Industries involved in international trade may face different market pressures that
influence wage levels. Global competition and trade dynamics can impact the
demand for certain skills and industries, affecting wage structures.

Industry-specific Economic Conditions:

Economic conditions specific to an industry, such as growth or recession, can

impact wage levels. Labor laws may need to adapt to changing economic
circumstances to ensure fair compensation for workers.

Social and Cultural Perceptions of Industries:

Social and cultural perceptions of certain industries can affect wage differentials.
Industries that are highly valued or considered prestigious may attract workers
willing to accept lower wages.

Risk factor

Various industries face distinct risk factors related to labor laws, reflecting the
unique challenges and characteristics of each sector. Understanding these risks is
crucial for both employers and policymakers to ensure compliance with labor
regulations and to create fair and safe working conditions. Here are some common
risk factors associated with different industries:

1. Construction Industry:

Occupational Safety and Health: Construction sites pose significant risks to

workers' safety. Compliance with safety regulations, proper training, and the
provision of personal protective equipment are crucial to mitigate risks.

Wage and Hour Compliance: Seasonal and project-based work in construction

may lead to challenges in ensuring compliance with wage and hour laws, including
overtime pay and breaks.

2. Healthcare Industry:

Workplace Violence: Healthcare workers may face the risk of workplace

violence. Labor laws need to address the protection of healthcare workers and
provide guidelines for preventing and managing such incidents.
Patient Privacy (HIPAA Compliance): Healthcare professionals must adhere to
regulations such as the Health Insurance Portability and Accountability Act
(HIPAA), which governs the privacy and security of patient information.

3. Technology and IT Industry:

Remote Work Challenges: The technology sector often involves remote work.
Ensuring compliance with labor laws in the context of telecommuting, including
issues related to overtime, rest breaks, and work hours, is critical.

Intellectual Property and Non-Compete Agreements: Labor laws may intersect

with intellectual property laws, particularly in industries where the protection of
proprietary information and non-compete agreements is common.

4. Manufacturing Industry:

Occupational Hazards: Manufacturing plants can pose risks to worker safety.

Compliance with safety standards, training programs, and the provision of
protective equipment are essential.

Labor Union Relations: The manufacturing sector may have a history of strong
labor unions. Labor laws must address collective bargaining rights, disputes, and
negotiations.

5. Retail and Hospitality Industry:

Wage and Hour Compliance: High turnover rates in retail and hospitality may
lead to challenges in wage and hour compliance, especially regarding minimum
wage, overtime pay, and break periods.

Customer-Facing Issues: Employees in customer-facing roles may counter

challenges related to customer behavior. Labor laws should address workplace
safety and protections for employees facing harassment.

6. Finance and Banking Industry:

Overtime and Work Hours: Financial institutions may have employees working
long hours. Ensuring compliance with overtime regulations and work hour
limitations is essential.
Confidentiality and Compliance: Labor laws intersect with financial regulations,
requiring strict adherence to confidentiality and compliance standards.

7. Agriculture Industry:

Seasonal Work: Agriculture often involves seasonal labor, requiring adherence to

regulations related to seasonal employment, minimum wage, and worker safety
during specific tasks.

Migrant Worker Protections: Labor laws in agriculture should address the

unique challenges faced by migrant workers, including housing conditions,
transportation, and access to legal protections.

8. Energy and Extractive Industries:

Safety in Hazardous Environments: Workers in the energy and extractive sectors

often operate in hazardous environments. Labor laws need to focus on safety
regulations and emergency response planning.

Addressing inter-industry wage differentials necessitates a comprehensive policy

approach, encompassing labor laws, industry regulations, and social initiatives.
Minimum wage legislation stands as a foundational measure, ensuring a baseline
level of compensation for all workers, irrespective of the industry.

To further tailor wage standards, the implementation of industry-specific

regulations can account for the diverse challenges each sector presents.
Strengthening and enforcing equal pay legislation addresses gender-based wage
disparities within and between industries, emphasizing the principle of equal pay
for equal work. Investing in education and training, coupled with reskilling
initiatives, empowers workers to navigate between industries, bridging skill gaps
and enhancing employability. Supporting collective bargaining processes,
especially in industries with lower wages, allows labor unions to negotiate for
improved compensation and working conditions. Financial incentives or tax breaks
for high-risk industries acknowledge the unique challenges these sectors face and
promote fair compensation for associated risks. Government procurement policies
and social responsibility initiatives can shape industry practices, fostering fair labor
practices. Monitoring and enforcement mechanisms, alongside flexible work
arrangements and apprenticeship programs, contribute to ensuring compliance with
wage regulations and providing diverse opportunities for workers. Tailoring
economic development initiatives to specific industries aims to boost growth,
create higher-paying jobs, and enhance overall industry competitiveness. This
comprehensive policy framework requires collaboration among government
bodies, industry stakeholders, and labor representatives for effective
implementation and sustainable impact.

In India, several legislations and regulations address the topic of wages, labor, and
related issues. While specific laws related to inter-industry wage differentials may
not be explicitly outlined, broader labor laws govern aspects such as minimum
wages, working conditions, and employment relationships. Here are some key
legislations in India relevant to the broader theme:

1. Minimum Wages Act, 1948:

The Minimum Wages Act establishes the framework for fixing and revising
minimum wages for various categories of employment. It aims to prevent
exploitation of labor and fix remuneration that is fair and reasonable.

2. Payment of Wages Act, 1936:

This legislation regulates the payment of wages to certain classes of persons

employed in industry. It outlines the timing and mode of wage payments,
deductions that can be made, and the permissible frequency of wage payments.

3. Equal Remuneration Act, 1976:

The Equal Remuneration Act prohibits discrimination in wages on the basis of

gender. It ensures that men and women receive equal remuneration for the same
work or work of a similar nature.

4. Industrial Employment (Standing Orders) Act, 1946:

This Act requires employers in industrial establishments to define the conditions of

employment, including working hours, holidays, and wage rates, by framing and
displaying standing orders.

5. Factories Act, 1948:

While primarily focusing on safety, health, and welfare of factory workers, the
Factories Act indirectly influences labor conditions by specifying limitations on
working hours, rest intervals, and overtime.

6. Trade Unions Act, 1926:

The Trade Unions Act provides for the registration of trade unions and defines the
rights, liabilities, and responsibilities of registered trade unions. Trade unions play
a role in negotiating and advocating for better wages and working conditions.

7. Labour Laws (Exemption from Furnishing Returns and Maintaining

Registers by Certain Establishments) Act, 1988:

This Act empowers the appropriate government to exempt any class of

establishments from the obligation of maintaining and furnishing records under
certain labor laws, which can indirectly impact wage-related matters.

8. Code on Wages, 2019:

The Code on Wages seeks to consolidate and simplify existing labor laws related
to wages. It includes provisions related to minimum wages, timely payment of
wages, and other aspects of wage-related matters.

9. Occupational Safety, Health, and Working Conditions Code, 2020:

While primarily focusing on safety and health, this Code also covers aspects
related to working conditions, which can have implications for the overall well-
being of workers, including their productivity and wages.

Constitutional perspective on wage differential:

The Constitution of India, in its Preamble, seeks to secure inter alia, to all its
citizens : Justice, Social, economic and Political. The Preamble has been amplified
and elaborated in Part III and Part IV of the Constitution which deals with the
fundamental rights and Directive Principles of State Policy.

 The right to equality before law and equal protection of laws (Article 14).
 Prohibition of discrimination on the ground, inter alia of sex (Article 15).
 Equality of opportunity in matters of public employment (Article 16).
  The right to practice any profession or occupation (Article 19).

"The Directive Principles envisage an end to economic exploitation and staggering

inequalities and inequities and cast upon the State the duty to secure a just social
order.

" Thus Article 38 which is the key of the Directive Principles lays down that "the
State shall strive to promote the welfare of the people by securing and protecting as
effectively as it may a social order in which justice, social, economic and political
shall inform all the institutions of national life.

" Article 39 inter alia, secure to:

(i) right to an adequate mean of livelihood;

(ii) equal pay for equal work for both men and women; and
(iii) the health and strength of workers, men and women, and the tender age
of children are not abused and that citizens are not forced by economic
necessity to enter avocation unsuited to their age or strength.

Article 41 requires that "the State, shall within the limits of its economic
capacity and development, make effective provisions for securing the right to
work, to education and to public assistance in cases of unemployment, old age,
sickness and disablement, and in other cases of undeserved want".

Under Article 43 "the State shall endeavour to secure by suitable legislation or

economic organisation or in any other way, to all workers, agricultural,
industrial or otherwise, work, a living wage, conditions of work ensuring a
decent standard of life and full enjoyment of leisure and social and cultural
opportunities ..."

Wage differential means difference in wages belonging to different classes of

workers. Generally the differential is result of practice. Sometimes existing wage
differential are reasonable and sometimes not so reasonable. Whenever they are
not so reasonable there is need for revising them on rational basis.
In Chandra Bhawan Boarding & Lodging v. State of Mysore, (1969) 1 L.LJ. 97,
the Supreme Court has held that difference in wages for different classes of
workers while fixing minimum rates of wages are justified.

It observed “The concept of minimum wage does not imply that there should be a
absolute uniform rate of wage for all workmen. There can be variation in the rate
of minimum wages according to diverse sector like the nature of work the degree
of education, training and skills, required for the job the degree of responsibility,
onerouseness of the job, the conditions under which in addition to being relevant
facts have also bearing on the efficiency of workman”.

Ilo view on wage inequality

The international labour organisation from the time of its establishment in 1919
has paid considerable attention in setting international labour standards inter alia
on minimum wage fixation, protection of wages and equality of remuneration.
These standard set by the ilo have been instrumental in ensuring better standard of
living for the workers. These standard have greatly influenced the labour
legislation in india, as else where in the world.

as per the ilo on wages-a workers' education manual "in 1928 the international
labour conference adopted a convention (no. 26) and a recommendation (no. 30)
on minimum wage-fixing machinery, the application of which was restricted to
industry and commerce, while in 1951 a convention (no. 99) and recommendation
(no. 89) covered agriculture. The wages, hours of work and manning (sea)
convention, 1946 (no. 76), and its revising convention of 1949 (no. 93) and of
1958 (no. 109) deal with the basic wages to be paid to able seamen. Particular
mention must also be made of the protection of wages convention, 1949 (no. 95),
and the recommendation (no. 85) of the same year; the labour clauses (public
contracts) convention, 1949 (no. 94), and the recommendation (no. 84) of the same
year; the equal remuneration convention, 1951 (no. 100), and the recommendation
(no. 90) of the same year; and the holidays with pay convention, (no. 52), the
recommendation (no. 98) of 1954, and the holidays with pay (agriculture)
convention., 1952 (no. 101)."
Fixation of minimum wages

ilo, workers' education manual states that the international labour conventions on
minimum wage-fixing machinery leave each government free to decide the kind of
machinery it considers most suited to the needs of its own country but provide that
representatives of employers and workers in the branches of industry concerned
shall take part in equal numbers in the operation of the system. Although
convention no. 26 of 1928 does not indicate the basis to be used for fixing
minimum wages, recommendation no. 30, adopted in the same year, states that the
minimum wages should enable the workers to maintain a suitable standard of
living. For this purpose consideration should be given to the rates of wages paid for
similar work in trades where the workers are adequately organised and have
concluded effective agreements. If no such rates have been fixed then the general
level of wages in the country or the particular locality should be used as a guide.

protection of wages

ilo convention no. 95 concerning the protection - of wages seeks to provides that
wages shall be paid (i) only in legal tender; and (ii) directly to workers concerned.
Further deduction would be permitted only under conditions and extent prescribed
by national law. Moreover wages may not be attached or assigned.
Recommendation no. 85 concerning protection of wages is more comprehensive. It
comprehensively provides for deduction from wages and periodicity of wages
payments.

Equal remuneration for men and women workers

in its 34th session the ilo adopted a convention concerning equal remuneration for
men and women workers for work of equal value, known as equal remuneration
convention, 1951.

The convention on equality of remuneration was complemented by

recommendation no. 90 of ilo (1951). The latter stressed that the achievement of
equality of remuneration should be accompanied by more extensive measures than
the mere fixing of pay rates. In 1958 the ilo concluded convention no. 111 against
discrimination in matters of employment and profession.
In september 1958, india ratified the ilo convention no. 111 concerning equal
remuneration for men and women workers for work of equal value which requires
a member-state ratifying the convention to promote as well as ensure the
application of the principle of equal remuneration to all workers through national
laws or regulations, legally established or recognized machinery for wage
determination, collective agreements between employers, machinery for wage
determination, collective agreements between employers and workers, or a
combination of these measures.
CONCLUSION

Any Wage Structure basically has two kinds of charecteristics ‘Equalities’ &
‘Diffrentials’. Equalities implies that wages & salary of two regions, firms,
industries & occupation are equal, while they differ in case of ‘Wage
Diffrentials’. Wage Diffrentials that build up the Wage Structure are of various
kinds. A research team of Johri & Agarwal has found the following findings:−

In a Plant or an Organization the Wage rate differ from individual to ind vidual.
Even for the same Job the Wages can differ in the same industry & the same
region. Thus, Wage Rates vary from Plant to Plant , Department to Department &
Industry to Industry.

The General Wage Level can also vary from regions to region in a particular
industry.In an organization there can be several Occupational Designations and the
wage rate between the highest & Lowest Paid can be quite wide.

Presence of the Trade Union have led to the rise in the wages on Productivity or
Performance Wages which resulted into the rise in the Wage Diffrential. But still
the annual total earnings of an worker at one level may differ from others in the
same level in some other industries due to the regional factor