8th Sem - CM - 803wage Differentials

8 Sem – CM- 805-Wage
th
Differential
Dr Jyotirmayee Choudhury
Wage Differential
• This relative difference in wage level due to the nature of job, skills of
person,sex,region, employers capacity to pay,demands and supply of labour in the
market. Is called wage differential.
• 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 such 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.
– Employees in MNCs are paid higher.

– Different industries have different wage structures resulting in disparities in remuneration
for identical works.
– Wide gaps exist between wages of employees of organised sector vs. unorganised sector.
– Women are almost half paid with respect to their male counterpart.
Wage Differential
• CAUSES OF WAGE DIFFERENTIAL----------
Imperfections in the employment market
• Lack of knowledge of workers i.e. alternative
job opportunities available elsewhere
• Social value and prejudices like gender, age,
status, ethnic origin
• Difference in degree of skills required to
perform a job.
Wage Differential
FACTORS INFLUENCING WAGE DIFFERENTIALS---------
• Demand and supply position of workers in the labour market,
• Relative bargaining power of the labour union and employers.
• Comparative wages paid by same industries in the same
region.
• Difference in productivity of labour
• Ability of the firm to pay its workers. Government policies on
minimum wages.
Wage Differential
PRINCIPLES OF WAGE DIFFERENTIALS------------
• Wage differential have a great social and economicsignificance as they
are directly related to allocationof economic resources of a country. 
• Commensurate with nature of job
• Equal pay for equal work(avoiding discrimination on the basis of
colour,gender ,age.)
• Equal remuneration act provide for the payment of equal
remuneration to man and women for the same or equal work)
• Incentive for improving skills and efficiency.
• Wages to attract workers.
Wage Differential
PURPOSE OF WAGE DIFFERENTIAL---
“Fair Wage Committee” recommended that wage differential based on
– Degree of skill required
– The strain of work
– Experience involved
– Extent of training required5. Levels of responsibilities
– Mental and physical exertion
– Fatigue involved
To induce employees to learn and acquire new skills
To shift employees a new industries
To shift employees a new industries
WAGE DIFFERENTIALS
PURPOSE OF WAGE DIFFERENTIALS
• To motivate employees to accept more responsible
jobs/positions
• To undertake economic and social welfare activities.
• To increase the pace of economic development
1.Cause labour to allocate among different occupation, industries and
geographical area in a country in such a manner as to maximize national
product
2. Enabled full employment/utilization of resources
3. Facilitate the economic growth
Wage differential
Types of wage Differential
• Occupational Wage Differentials
• Inter-Industry Differentials
• Personal Wage Differential
• Sectoral Wage Differential
• Regional (Inter-Area) Differentials
Occupational Wage Differentials
Occupational Wage Differentials ------------
• Different occupations require different qualifications,
skills and different degree of responsibility
• To induce workers to undertake “more
demanding”, “more risky” jobs.
• Encourage workers to develop skills in anticipation
ofhigher earnings in future.
• To perform social function by way of determining
the social status of workers.
Wage Differentials
Inter-Industry Differentials--------
• Arise when the workers in the same occupation and
in the
• same area but in different industries are paid
different wages.
1. Extent of unionization
2. Employers ability to pay/ product demand in market
3. Provides opportunity for workers to switch to higher
wage industries.
Wage Differential
Personal Wage Differential--------------
•Arise because of differences in personal characteristics (age or sex) of workers who
work in the same plant and the same occupation.
•In occupations which involve muscular work, women workers are employed but paid
less than men workers irrespective of “Equal pay for equal work” is the guideline
of-----------------
– Supremecourt of India
– I.L.O. convention (No. 100)
– Various Decisions of Industrial court
– Decisions of Labour Tribunals
– Decisions Minimum Wages Committee
– Decisions Fare Wage Committee
•
Wage Differential
Sectoral Wage Differential----------
• Depends upon nature of workers group
(organized/ unorganized) and level of economic
development of the sector.
• Agricultural workers are not able to better their
living conditions, whereas workers in industrial
sectors have their own unions to protect their
members’ economic and other interest.
Wage Differentials
Regional (Inter-Area) Differentials---------
• Workers in same industry and the same
occupational group, but living in different
geographical areas, are paid different wages
for------------
– Irritating climate
– Isolation
– Disparities in cost of living
Wage Diffeential
• The concepts of trade unions, wages and wage
differentials are over a century old issue in
India.
• India’s economic development still needs a
big push and the factors – unions, wages and
wage differentials can play a vital role.
Thank You All

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8 Sem – CM- 805-Wage

– Employees in MNCs are paid higher.

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