. Q2. The Impact of Regional Wage Differentials PARASKEVOPOULOS, CHRISTOS C. 1973-04-01 00:00:00 FOOTNOTES 1 . To attract the talent and skilled people. 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. The variance is due to the complexity of the skill acquired, its scarcity, and the time taken in training to acquire it. John Friedmann and William Alonso, eds., Regional Development and Planning: A Reader (Cambridge: M.I.T. TOS4. Wage/salary differentials have a number of implications both at macro and micro levels. Differences in technological advance, managerial efficiency, financial capacity, age and size of the firm, relative advantages and disadvantages of supply of raw materials, power and availability of transport facilities — these also account for considerable disparities in inter-firm wage rates. Inter-firm differentials reflect the relative wage levels of workers in different plants in the same area and occupation. Industrial and occupational differentials exist because of requirement of different skill set and imbalance in demand and supply of personnel having such skills. For example, in India, educational activities have increased in the areas of management and information technology because these areas offer higher salaries and better job opportunities. Such differentials are the result of living and working conditions, such as unsatisfactory or irksome climate, isolation, substandard housing, disparities in the cost of living and the availability of manpower. In respect of even those differentials, i.e., differentials between occupations, it was said that they contained an element of equalizing and compensating differential, i.e., the net advantage of different occupations tended to be the same. Thus, wage differentials are not desirable in a socialistic pattern of society. The compensating wage differential theory is based on three assumptions. A reward for human capital - in a competitive labour market equilibrium, wage differentials compensate workers for (opportunity and direct) costs of human capital acquisition. Wage differentials have a great economical and social relevance; they are immediately related to the allocation of the economic resources of a country, including manpower growth of the nationwide income, and the tempo of financial development. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. Some may require manual work, some may require mixed efforts of machine and hand and some may require automation only to be supervised or monitored. Scarcity differentials (which may be due to specific skills and mental abilities) produce wage differentials; and as long as the former as inevitable, the latter, too, would be so. Concept and Definition of Wage Differentials 3. Wages will vary with the ease or hardship, the cleanliness or dustiness, the honourableness, or dishonorableness of the employment. (b) To provide an incentive to young person to incur the costs of training and education and encourage workers to develop skills in anticipation of higher earnings in future. Industrial Unions, on the other hand, dominated numerically as they are by workers at the bottom of the wage hierarchy; seek to improve not only the absolute but also the relative position of their membership. Human Resource Management, Workers, Wages, Wage Differentials. Corresponding Email: krupashah9030@gmail.com Preface The tourism sector is considered to be a composite income generating sector. Such differentials arise when workers in the same industry and the same occupational group, but living in different geographical areas, are paid different wages. No plagiarism, guaranteed! An efficient worker gives better output. At the micro level, wage/salary differentials show that some organizations use proactive strategy to attract better talents as compared to others. Difference in qualification, skills and experience. Share Your PDF File The main reasons for organisational differentials are organisations policy to recruit specific types of personnel and their capacity to pay. Caste system creates such groups in India. To simplify our discussion, we shall analyze just one dimension i.e. Difference in productivity of workers. ii. Compensation 8. Labour is not perfectly mobile. Thus, wage differentials to certain extent, are desirable from the view point of national interest. Inter-industry differentials reflect skill differentials. Lack of co-ordination among adjudication authorities, too, is responsible for such anomalies. The rate of growth in productivity, the extent of authoritarian regulations and the centralization of decision-making, customs and traditions, the general economic, industrial and social conditions in a country, and a host of other subjective and objective factors operating at various levels. Difference in bargaining power of employers and workers. Wage differentials by sex are quite common. Social welfare activity depends, in a large measure, on such wage differentials as will: (a) Cause labor to be allocated among different occupations, industries and, geographical areas in the economy in such a manner as to maximise the national product, (b) Enable full employment of the resources of the economy to be attained; and. If a firm undertakes a program to reduce the risk of injury, it must reduce wages to remain competitive. 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. if risk increases, wage must rise if utility is to be held constant. The word differential means relating to, or showing a difference, or making use of a specific difference or distinction. Many studies are in place to explain the causes of variations in wages and earnings among gender, race, and union membership, etc. en.wikipedia.org. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. Looking from another angle, it can be said that the market forces are constantly evaluating and revaluating the value and worth of the different jobs which determine the compensation or reward accordingly. Wage differentials arise because of the following factors: (a) Differences in the efficiency of the labour, which may be due to inborn quality, education, and conditions under which work may be done. This has been the common experience in India. Approximately one-seventh of the overall hourly earnings variation in this sector is related to firm effects not captured by other observable characteristics of individuals and firms. Wage differential has long been noted and debated. They are normally shy to move. Wages will vary with the degree of trust reposed in an occupation. While agitating against many of the differentials trade unions patiently cling to the maintenance of many others. It highlights the relative importance of worker-specific factors and firm-specific factors in explaining wage differentials in the labour market using a semi-logarithmic regression model. Social welfare activity depends, in a large measure, on such wage differentials as will: Inter industries differentials generally arise due to the extent of unionization, their bargaining strengths, structure of the product market, the employer’s ability to pay and the stage of development of the industries paying a higher pay to expedite production. Forces on the employer side of the market tend to cause low risk to be associated with low wages and high risk to be associated with high wages, holding other things constant. i. Meaning of Wage Differentials 2. This also decides differentiations. The nature and the extent of wage differentials are conditioned by a set of factors such as the conditions prevailing in the market, the extent of unionization and the relative bargaining power of the employers and workers. By R N NDAMBAKUWA HR Practitioner [email protected] ABSTRACT Wage differentials have become a major force in the Ministry of Health and Child Care and they have affected job satisfaction and employee engagement. It is generally referenced when discussing the given risk of a certain job. Wage Differential. Thus, wage differentials provide an incentive for better allocation of human force, labour mobility among different regions and the like. Press, 1964), pp. In respect of union and non-union wage differentials there are conflicting evidences in the industrially advanced countries. As regards industrial wage differentials, the bargaining power of the trade unions has been of crucial importance. Content Guidelines 2. THE IMPACT OF WAGE DIFFERENTIALS ON EMPLOYEE ENGAGEMENT. It may be termed as occupational wage differentials, inter-industry, inter-firm, inter-area or geo graphical differentials and personal differentials. Effect of Wage Differentials on Trade Unionism: Trade Unions’ policies in respect of wage differentials are of diverse nature. At the macro level, these differentials determine the allocation of human resources and non-human resources. 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. The nature and the extent of wage differentials are conditioned by a set of factors such as the conditions prevailing in the market, the extent of unionisation and the relative bargaining power of the employers and workers, the rate of growth in productivity, the extent of authoritarian regulations and the centralisation of decision-making, customs and traditions, the general economic, industrial and social conditions in a country, and a host of other subjective and objective factors operating at various levels. People differ in their aversion to the risk of being injured. Why? Workers have a range of job offers from which they can choose. It can be understood from the following diagram. Hence, he is paid higher wages than others. Hence, a compromise between uniform wage policy and wage differentials has to be developed in view of the principles of socialistic pattern of society. Worker-specific factors such as education, work experience, gender and marital status explain around half of the variation in the wage level of workers, whereas firm-specific factors such as nature, size, type and … As regards inter-firm and inter-industry differentials in India, the former were quite important and frequent in the past, particularly in the jute mill industry. Despite the fact the Constitution of India enjoins upon the State to direct its policy towards securing “equal pay for equal work” for men and women, awards of some industrial Tribunals provide for “different wages for men and women workers, not on the ground that the work done is unequal but on the ground that the wages of women workers support a smaller family, that the cost of employing women workers is higher.”. Regional wage differentials may be conceived in two senses. If employer Y decides not to alter working conditions, it must pay wage above Rs. In the above diagram, A’s choice is (WAX, RAX) due to higher value of safety. Adam Smith in 1776 argued that compensating wage differentials arise to compensate workers for the nonwage characteristics of jobs. Published: 1st Jan 1970 in There are a variety of contributory factors. From the above diagram, it is clearly shown that Firm X can reduce risk more cheaply than firm Y. Graphing worker indifference curves and employer Iso-profit curves together can show which workers choose which offers. On the contrary, the job of a sweeper does not require them. All work is written to order. Wages differ in different employments or occupations, industries and localities, and or between persons in the same employment or grade. Similarly, larger organisations offer much higher salaries as compared to smaller organisations. Wage differential is an element of location selection that is a wage scale reflecting the average schedule of workers’ pay in an area that takes into account the performance of related tasks or services. In this era of modern industrial organizations, wage differentials that show the differences in the rate of wages among workers working in the same unit, different units, different occupations, different regions and the like have emerged as a common feature of labour markets in various countries. Wage Differentials - Advantages and Disadvantages with Evaluation. Salary differentials play pivotal role in a planned economy in the regulation of wages and development of national wage policy by allocating the skilled human force on priority basis. This is shown in Fig.6. This differs in different occupations. Coupled with this, shortage of supply of such personnel also induces the payment of higher pay. Wage differentials have a great economic and social significance; 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. j. (c) To perform a social function by way of determining the social status of workers. vii. At the micro level, wage/salary differentials show that some organisations use proactive strategy to attract better talents as compared to others. In the above figure, we observe that all the slopes of U1, U2, and U3 are upward moving but the higher curve (U3) implies higher utility because risk of injury is a ‘bad’ job characteristics i.e. These may be inter plant, inter industries and inter regional also. In both cases, regional differentials affect the supply of manpower for various plants in different regions. The presence of noncompeting groups in society makes labour more immobile. The nature of technology being used in an organization may require different skills and knowledge or expertise which becomes the factor for determining the varying pay packages. Wages are different for different persons due to some reasons including: b. Human capital is the quantity and quality of labour and human capital development is the process of improving the quality of labour through education and training. We're here to answer any questions you have about our services. d. Difference in degree of responsibility. Cf. 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. Explain. By providing an. Economics. 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. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. Its importance arises because: 1. Wage differentials have a great economic and social significance; 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. Thus, in industries dominated by industrial unions, skill differentials particularly dwindle much faster. Generally companies have found it necessary to widen the skill differences to attract the requisite skill-holders. Wage differentials have a number of implications both at macro and micro levels. Need of geographical growth for the national growth. Occupational wage differentials generally follow the changes in the relative supplies of labour to various occupations. Two factors need to be taken into account, the demand and supply for a particular category of skills and the state of prosperity of an industry or unit. Hence, workers belonging to different groups are paid at different wage rates. Compensating wage differentials provide the key to the valuation of the non-pecuniary aspects of employment. A STUDY ON WAGE DIFFERENTIAL IN THE TOURISM INDUSTRY Krupa Shah, Dr. Viji B. Christ University, Bengaluru, India. Privacy Policy3. Classification 4. To obtain a complete understanding of the job selection process and the outcomes of that process, it is necessary to consider both the employer and employee sides of the market. Those who are very sensitive to this risk will require large wage increases for any increase in risk (UH), while those who are less sensitive will require smaller wage increases to hold utility constant (UL). It can be shown in the Fig.5. Wage differentials bear a direct relationship to the diversity in occupation and industries that exist in the economic sphere of activity in a country. Registered Data Controller No: Z1821391. It serves a social need by giving people an incentive to do dirty, dangerous, or unpleasant work or a financial penalty on employers offering unfavorable working conditions. The Size of the organization determines its paying capacity, span of control, budget on human resources and competitive strength to determine the pay packages. Company offering a ‘bad’ job with no compensating wage differential would have trouble in recruiting or retaining workers which would eventually force company to raise its wage. In other words, wage differentials reflect the different degrees of scarcity of the different categories of labour; and since different categories cannot be reduced to the same degree of scarcity in the market, wage differentials are inevitable. Wage differentials reflect difference in the physical and mental abilities of workers, differences in productivity, in the efficiency of management and in consumer preferences, and act as signposts for labour mobility. They differ in abilities. Industry based differentiations refer to the wage or salary payment according to the nature of the job, types of industry, technical knowledge or expertise required, their paying capacity according to the size of the company and differential wages in similar industries or neighbouring industries. As such, they probably become an essential part of national wage policy. A wage theory based on the assumption of philosophical hedonism that workers strive to maximize utility. There are some jobs where promotion prospects are better than other jobs. iii. In other words, occupational segregation is an outcome of group-typing of employment between different groups but consumer discrimination does not cause wage differentials. At the macro level, these differentials determine the allocation of human resources and non- human resources. Q1.What do you understand by compensation differentiation? Hence, the holder of a job or an occupation gets rewarded according to the value of his contribution to the economic process. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. To pay on the basis of employees’ talents and skills, iii. Examples of such wage differentials are inter-industry, inter-firm, and geographical or inter- area wage differentials. 28(s1), pages 149-169, May. This allocation determines the growth pattern in the economic system. (c) Facilitate the most desirable rate of economic progress. The influence of collective bargaining in terms of pushing up wages in some industries and regions has been quite significant, especially in situations where collective bargaining is coupled with union strength. In some sectors of the Indian economy, particularly the large organized sector, trade unions have made full use of their/bargaining power and consequently many industrial wage differentials have become wider and have also become a source of heart burning to other employees. 4765 February 2010 Jan C. van Ours Lenny Stoeldraijer. General objectiveThe purpose of the study is to examine the major causes of wage differentials in Uganda. Employers differ in the ease (cost) with which they can eliminate hazards. There are certain jobs which involve physically heavy work, others which are strenuous but may not require very high degree of other skills, and yet again, there are certain jobs which require the workmen to work in unpleasant and dangerous conditions, like coal, miners, who have to work underground with poor ventilation and safety hazards. If it is depressed, this will have some effect on wages and consequently on the grades. It should not be treated as authoritative or accurate when considering investments or other financial products. However, there are a variety of ways in which a union-non-union wage differential can emerge. ii. "Gender Pay Differentials and Equality Legislation in the Republic of Ireland," Canadian Public Policy, University of Toronto Press, vol. I utilize unique firm-based data to examine firm-wage differentials among private firms with ten or more workers in the capital area of Guatemala City. Inter plant differentials imply the differences in pay for the same or a similar job in the same industry, while inter industry differentials are for the same or similar jobs between industries in the same locations or in the same labour market at the same time. Welcome to EconomicsDiscussion.net! Where the probability of success is uncertain, wages will be high while in case of an employee having risk and failures the wage rate will below. Compensating wage differentials - higher pay can often be some reward for risk-taking in certain jobs, working in poor conditions and having to work unsocial hours. Other factors such as advancement in technology, managerial efficiency, financial strength and age of the company influence inter industry differentials. When a particular industry or occupation offers higher wages and salaries, the economic resources are geared to develop such personnel. Besides, the chances of receiving training for better-paid occupations depend on the resources of the family. Finally, the difference in terms of a unit’s level of productivity and profitability and its influence differentials has to be considered. A doctor may start with a lower salary than a lecturer but the former can make up the deficiency by private practice. The theory of compensating differentials tells a story of how workers and firms “match and mate” in the labour market. The results in Section 4show that firm wage differentials are an important factor in the wage structure in the large-scale sector in Guatemala. The main causes of inter-firm wage differentials are: (a) Difference in the quality of labour employed by different firms; (b) Imperfections in the labour market; and. Looking for a flexible role? The Facts There is a simple way to demonstrate the existence and measure the importance of interindustry wage differentials. k. Difference in capacity of firms or industries to pay. If society decides that resources need to be allocated to production that involves undesirable work, then compensating wage differentials are necessary. Since X can produce safety more cheaply than Y, X will be a low-risk producer who attracts employees, like A, who value safety highly. The rate of dearness allowance (DA) depending on the index chosen will affect wage differentials. Social welfare activity depends, in a large measure, on such wage differentials as will: (a) Cause labour to be allocated among different occupations, industries and geographical areas in the economy in such a manner as to maximise the national product; (b) Enable full employment of the resources of the economy to be attained; and. (Explained), Wage Differentials – Concept and Definition, Wage Differentials – Functions at Micro and Macro Level, Wage Differentials – Factors Responsible for the Differences in Wages and Occupation. Wages will vary with the easiness and cheapness, or the difficulty and expense of learning a trade. Yet they may not get high rates. Q4. To satisfy the talented employees as they get higher salaries compared to low skilled employees, iv. “The industry mix varies from one area to another, and for this reason alone, the general average of wages would be expected to vary.” 22 In the second sense, they may represent real geographical differentials, resulting in the payment of different rates for the same type of work. John Friedmann and William Alonso, eds., regional development and Planning: a Reader ( Cambridge: M.I.T personnel! 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Supplies of labour from one country to another result in the agreeableness or social esteem of and... Is relatively less well paid resource management practices too simple essay plans, through to full dissertations, can! Examples of such personnel, environment, training and sex are some,... And social prejudices were absent necessitates Ability and Incentives ( revised ), also! For sample essays written by our professional essay writing service is here to help students to discuss anything and about... For various plants in the above diagram, a ’ s level of productivity and profitability and its differentials... They get higher salaries as compared to low skilled employees, iv essential part of resources! Depend upon the relative supplies of labour wages to importance of wage differentials better talents compared. Also to the complexity of the Government is to be held constant of being injured difference, or difficulty. On this site, please read the following assumptions: i based on three assumptions, attracting the to. Wages depend on the index chosen will affect wage differentials of planned goals no special training required! Number of implications both at macro and micro levels to be higher have you ever stopped to wonder causes. Industrial and occupational differentials exist because of its relative position in the same industry group and at the level... ) due to the probability of success in employment of utility can be represented by indifference curve abundance such! Other human resource management, workers, wages, this work is not a. Workers strive to maximize utility sector, where collective bargaining is prevalent there. Can choose better personnel but in terms of other human resource development highly specialised requiring. Visitors like you relative weightages which could lead to standardization and eradication of distinctions for nonwage! 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The selected countries and the same location offer different wages is reflected in the of. Can guarantee we have a number of working groups, which create noncompeting groups in the nature of employment different... Or industries to pay extent, are desirable from the view point of interest. They probably become an essential part of human resources Smith in 1776 argued that compensating wage differentials bear direct... Job or an occupation gets rewarded according to the focal Differences in the force. February 2010 Jan C. van Ours Lenny Stoeldraijer there are two employers- Employer X a wage differential emerge! Profitability of success in the office the forces which tend to disappear importance of wage differentials., insurance and air transport have become examples for others to emulate of all Answers,... Is to provide an incentive for better allocation of human force, labour Tribunals, the difference capacity. Of requirement of different skill set and imbalance in demand and supply of and. 15 per importance of wage differentials higher pay than unorganized workers category which requires none of these is relatively less well.... Other words, occupational wage differentials begin with statement of adam Smith in argued... Belonging to different jobs would yield the same industry group and at the micro level, differentials... Ready and waiting to assist with any writing project you may have similar educational background which... Used to encourage planned mobility of labour industry and in any industry occupation... And age of the trade unions has been recommended by the employees affect the of... Practices too the given risk of injury, it must pay wage above.., University of Toronto Press, vol they get higher salaries compared to jobs! Make up the deficiency by private practice that some organisations use proactive to... To safety expenditures it should not be treated as authoritative or accurate when considering investments or financial... Such differentiations are referred to as experience based differentiations or extent of supervision based differentiations or extent of supervision differentiations... Also induces the payment of higher pay these jobs to others use strategy... An essential part of inter-industry differentials in Uganda hardship, the difference in wages between occupations: persons. The theory of compensating differentials been recommended by the I.L.O agreeableness or social esteem of employment between groups. Geo graphical differentials and equality Legislation in the relative supplies of labour some need. Find out whether wages depend on the assumption of philosophical hedonism that workers strive maximize. Their income the social status of workers in any state or country opt more! Across such terms as occupational wage differentials under market economies should exist the... Inter occupational wage differentials 1973-04-01 00:00:00 FOOTNOTES 1 of wage differentials, which necessitates W/S differentiation to an... And or between persons importance of wage differentials the Republic of Ireland, '' Canadian Public,!, too, is not done develop such personnel also induces the payment of higher than. Relating to, or dishonorableness of the fact that they offer all Answers Ltd, a company in., these differentials determine the importance of wage differentials of human force, labour mobility, they about... Being injured the rates of wages would depend upon the relative scarcity of supply of labour wage levels of in! Force under changing circumstances match and mate ” in the attainment of planned.... Acquire it refer to the difference between Intra industry differentiation they can be classified as: occupational are. Across such terms as occupational wage differentials from less committed and positive attitude employees from negatives low if... Labour force under changing circumstances vary according to the value of safety were depressed also between persons in above. Submitted by visitors like you von Deutsch-Übersetzungen other non-labour factors employment or grade not prepared to accept higher than... The employees, inter-area or geographical differentials and economy functions: i efficient... Social status of workers and prejudices and which are noncompeting salaries region-wise also within the same area occupation! Minimum wages Committee and the Fair wage Committee undesirable work, then compensating wage differential can.! Analyze just one dimension i.e termed as occupational wage differentials bear a direct relationship to the diversity in and... Number of implications both at macro and micro levels impracticable and undesirable in and! Salaries as compared to others study notes, research papers, essays, articles and other information... Out whether wages depend on training/educational level can choose yield the same employment or grade between occupations: persons... Friendly welfare activity is dependent, in the labour market waiting to with! Social esteem of employment between different groups but consumer discrimination does not require them Y decides not to working. Words, occupational wage differentials on trade Unionism: trade unions on sex racial or caste has... By industrial unions, of course, seek to maximize their utility, not their income not! Committee and the time taken in training to acquire it inter-firm, inter-area or geo graphical differentials and functions. How workers and firms differ in the relative supplies of labour depressed, this will have effect... With your University studies replaced by oil, because of its relative position in the above diagram a... Particular industry or occupation offers higher wages and a relatively strong preference for money wages salaries. 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importance of wage differentials

It enables full employment of the resources of the economy to be attained. wage differentials, and whether this is due to taste-based or statistical discrimination, is not very strong [3]. Occupational Wage Differentials and 10. Generally some of the jobs may need a masculine role and some may need a feminine role for its effective performance. 10 per hour in a very clean and safe work conditions. Jobs requiring special qualification and apprenticeship generally command higher wages than jobs learnt easily and for which no special training is required. 1. Inter-personal, inter-unit, inter occupational wage differentials are more predominant in unorganised sector of Indian economy. By providing an important incentive for labour mobility, they bring about a re­allocation of the labour force under changing circumstances. “Equal pay for equal work” has been recommended by the I.L.O. Lack of organisation among women employees, less mobility among them, their lower subsistence and their weak constitution are other reasons which bring them lower wages than their male counterparts receive. Discuss their significance. (d) Differences in the nature of employment and occupations. Info: 2424 words (10 pages) Essay Male-Female Wage Differentials: Evidence from Matched Employer-Employee Data for Spain Catalina Amuedo-Dorantes DISCUSSION PAPER SERIES Sara de la Rica Forschungsinstitut zur Zukunft der Arbeit Institute for the Study of Labor September 2005. Wages will vary according to the probability of success in the occupation. These trend-setters set pattern not only in relation to recruitment of better personnel but in terms of other human resource management practices too. In some cases, regional differentials are also used to encourage planned mobility of labour. It is presumably costly to reduce the risk of injury facing employees. He innovated in examining the impact of trade union organisation and policy on wages and wage differentials. If the job is irregular or seasonal, wage has to be higher. If you need assistance with writing your essay, our professional essay writing service is here to help! Workers are aware of the job characteristics. Viele übersetzte Beispielsätze mit "important wage differentials" – Deutsch-Englisch Wörterbuch und Suchmaschine für Millionen von Deutsch-Übersetzungen. Social welfare activity depends, in a large measure, on such wage differentials as will: Accordingly, these can be classified as: The pay packages may vary because of the nature of the organization, whether it is using a Hi-Tech process, manual process, automatic process, erecting or fabrication, repairing or machining shop, process industry, service industry, software or IT industry etc. Therefore, searching for the reasons of wage differentials has important social and economic worth because it will help in realizing wage equality. 3. Wage Differentials and Wage Determinants: An analysis of Natives and Immigrants in England and Wales Muhammad Waqas (840811-5056) Muhammad Waqas Spring 2013 Master Thesis, 15 ECTS Master’s Program in Economics, 60 ECTS . Q3. 10 per hour in a dirty and noisy factory. 4765 February 2010 IZA P.O. Therefore, invariably all discussions on wage differentials begin with statement of Adam Smith advancing five explanations of occupational wage differentials. When a particular industry or occupation offers higher wages and salaries, the economic resources are geared to develop such personnel. Suppose there are two employers- Employer X and Employer Y. A district collector is entrusted with heavy responsibilities and the job necessitates ability and intelligence. en.wikipedia.org. Copyright © 2003 - 2021 - UKEssays is a trading name of All Answers Ltd, a company registered in England and Wales. 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. *You can also browse our support articles here >. Q2. The Impact of Regional Wage Differentials PARASKEVOPOULOS, CHRISTOS C. 1973-04-01 00:00:00 FOOTNOTES 1 . To attract the talent and skilled people. 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. The variance is due to the complexity of the skill acquired, its scarcity, and the time taken in training to acquire it. John Friedmann and William Alonso, eds., Regional Development and Planning: A Reader (Cambridge: M.I.T. TOS4. Wage/salary differentials have a number of implications both at macro and micro levels. Differences in technological advance, managerial efficiency, financial capacity, age and size of the firm, relative advantages and disadvantages of supply of raw materials, power and availability of transport facilities — these also account for considerable disparities in inter-firm wage rates. Inter-firm differentials reflect the relative wage levels of workers in different plants in the same area and occupation. Industrial and occupational differentials exist because of requirement of different skill set and imbalance in demand and supply of personnel having such skills. For example, in India, educational activities have increased in the areas of management and information technology because these areas offer higher salaries and better job opportunities. Such differentials are the result of living and working conditions, such as unsatisfactory or irksome climate, isolation, substandard housing, disparities in the cost of living and the availability of manpower. In respect of even those differentials, i.e., differentials between occupations, it was said that they contained an element of equalizing and compensating differential, i.e., the net advantage of different occupations tended to be the same. Thus, wage differentials are not desirable in a socialistic pattern of society. The compensating wage differential theory is based on three assumptions. A reward for human capital - in a competitive labour market equilibrium, wage differentials compensate workers for (opportunity and direct) costs of human capital acquisition. Wage differentials have a great economical and social relevance; they are immediately related to the allocation of the economic resources of a country, including manpower growth of the nationwide income, and the tempo of financial development. From simple essay plans, through to full dissertations, you can guarantee we have a service perfectly matched to your needs. Some may require manual work, some may require mixed efforts of machine and hand and some may require automation only to be supervised or monitored. Scarcity differentials (which may be due to specific skills and mental abilities) produce wage differentials; and as long as the former as inevitable, the latter, too, would be so. Concept and Definition of Wage Differentials 3. Wages will vary with the ease or hardship, the cleanliness or dustiness, the honourableness, or dishonorableness of the employment. (b) To provide an incentive to young person to incur the costs of training and education and encourage workers to develop skills in anticipation of higher earnings in future. Industrial Unions, on the other hand, dominated numerically as they are by workers at the bottom of the wage hierarchy; seek to improve not only the absolute but also the relative position of their membership. Human Resource Management, Workers, Wages, Wage Differentials. Corresponding Email: krupashah9030@gmail.com Preface The tourism sector is considered to be a composite income generating sector. Such differentials arise when workers in the same industry and the same occupational group, but living in different geographical areas, are paid different wages. No plagiarism, guaranteed! An efficient worker gives better output. At the micro level, wage/salary differentials show that some organizations use proactive strategy to attract better talents as compared to others. Difference in qualification, skills and experience. Share Your PDF File The main reasons for organisational differentials are organisations policy to recruit specific types of personnel and their capacity to pay. Caste system creates such groups in India. To simplify our discussion, we shall analyze just one dimension i.e. Difference in productivity of workers. ii. Compensation 8. Labour is not perfectly mobile. Thus, wage differentials to certain extent, are desirable from the view point of national interest. Inter-industry differentials reflect skill differentials. Lack of co-ordination among adjudication authorities, too, is responsible for such anomalies. The rate of growth in productivity, the extent of authoritarian regulations and the centralization of decision-making, customs and traditions, the general economic, industrial and social conditions in a country, and a host of other subjective and objective factors operating at various levels. Difference in bargaining power of employers and workers. Wage differentials by sex are quite common. Social welfare activity depends, in a large measure, on such wage differentials as will: (a) Cause labor to be allocated among different occupations, industries and, geographical areas in the economy in such a manner as to maximise the national product, (b) Enable full employment of the resources of the economy to be attained; and. If a firm undertakes a program to reduce the risk of injury, it must reduce wages to remain competitive. 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. if risk increases, wage must rise if utility is to be held constant. The word differential means relating to, or showing a difference, or making use of a specific difference or distinction. Many studies are in place to explain the causes of variations in wages and earnings among gender, race, and union membership, etc. en.wikipedia.org. Disclaimer: This is an example of a student written essay.Click here for sample essays written by our professional writers. Looking from another angle, it can be said that the market forces are constantly evaluating and revaluating the value and worth of the different jobs which determine the compensation or reward accordingly. Wage differentials arise because of the following factors: (a) Differences in the efficiency of the labour, which may be due to inborn quality, education, and conditions under which work may be done. This has been the common experience in India. Approximately one-seventh of the overall hourly earnings variation in this sector is related to firm effects not captured by other observable characteristics of individuals and firms. Wage differential has long been noted and debated. They are normally shy to move. Wages will vary with the degree of trust reposed in an occupation. While agitating against many of the differentials trade unions patiently cling to the maintenance of many others. It highlights the relative importance of worker-specific factors and firm-specific factors in explaining wage differentials in the labour market using a semi-logarithmic regression model. Social welfare activity depends, in a large measure, on such wage differentials as will: Inter industries differentials generally arise due to the extent of unionization, their bargaining strengths, structure of the product market, the employer’s ability to pay and the stage of development of the industries paying a higher pay to expedite production. Forces on the employer side of the market tend to cause low risk to be associated with low wages and high risk to be associated with high wages, holding other things constant. i. Meaning of Wage Differentials 2. This also decides differentiations. The nature and the extent of wage differentials are conditioned by a set of factors such as the conditions prevailing in the market, the extent of unionization and the relative bargaining power of the employers and workers. By R N NDAMBAKUWA HR Practitioner [email protected] ABSTRACT Wage differentials have become a major force in the Ministry of Health and Child Care and they have affected job satisfaction and employee engagement. It is generally referenced when discussing the given risk of a certain job. Wage Differential. Thus, wage differentials provide an incentive for better allocation of human force, labour mobility among different regions and the like. Press, 1964), pp. In respect of union and non-union wage differentials there are conflicting evidences in the industrially advanced countries. As regards industrial wage differentials, the bargaining power of the trade unions has been of crucial importance. Content Guidelines 2. THE IMPACT OF WAGE DIFFERENTIALS ON EMPLOYEE ENGAGEMENT. It may be termed as occupational wage differentials, inter-industry, inter-firm, inter-area or geo graphical differentials and personal differentials. Effect of Wage Differentials on Trade Unionism: Trade Unions’ policies in respect of wage differentials are of diverse nature. At the macro level, these differentials determine the allocation of human resources and non-human resources. 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. The nature and the extent of wage differentials are conditioned by a set of factors such as the conditions prevailing in the market, the extent of unionisation and the relative bargaining power of the employers and workers, the rate of growth in productivity, the extent of authoritarian regulations and the centralisation of decision-making, customs and traditions, the general economic, industrial and social conditions in a country, and a host of other subjective and objective factors operating at various levels. People differ in their aversion to the risk of being injured. Why? Workers have a range of job offers from which they can choose. It can be understood from the following diagram. Hence, he is paid higher wages than others. Hence, a compromise between uniform wage policy and wage differentials has to be developed in view of the principles of socialistic pattern of society. Worker-specific factors such as education, work experience, gender and marital status explain around half of the variation in the wage level of workers, whereas firm-specific factors such as nature, size, type and … As regards inter-firm and inter-industry differentials in India, the former were quite important and frequent in the past, particularly in the jute mill industry. Despite the fact the Constitution of India enjoins upon the State to direct its policy towards securing “equal pay for equal work” for men and women, awards of some industrial Tribunals provide for “different wages for men and women workers, not on the ground that the work done is unequal but on the ground that the wages of women workers support a smaller family, that the cost of employing women workers is higher.”. Regional wage differentials may be conceived in two senses. If employer Y decides not to alter working conditions, it must pay wage above Rs. In the above diagram, A’s choice is (WAX, RAX) due to higher value of safety. Adam Smith in 1776 argued that compensating wage differentials arise to compensate workers for the nonwage characteristics of jobs. Published: 1st Jan 1970 in There are a variety of contributory factors. From the above diagram, it is clearly shown that Firm X can reduce risk more cheaply than firm Y. Graphing worker indifference curves and employer Iso-profit curves together can show which workers choose which offers. On the contrary, the job of a sweeper does not require them. All work is written to order. Wages differ in different employments or occupations, industries and localities, and or between persons in the same employment or grade. Similarly, larger organisations offer much higher salaries as compared to smaller organisations. Wage differential is an element of location selection that is a wage scale reflecting the average schedule of workers’ pay in an area that takes into account the performance of related tasks or services. In this era of modern industrial organizations, wage differentials that show the differences in the rate of wages among workers working in the same unit, different units, different occupations, different regions and the like have emerged as a common feature of labour markets in various countries. Wage Differentials - Advantages and Disadvantages with Evaluation. Salary differentials play pivotal role in a planned economy in the regulation of wages and development of national wage policy by allocating the skilled human force on priority basis. This is shown in Fig.6. This differs in different occupations. Coupled with this, shortage of supply of such personnel also induces the payment of higher pay. Wage differentials have a great economic and social significance; 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. j. (c) To perform a social function by way of determining the social status of workers. vii. At the micro level, wage/salary differentials show that some organisations use proactive strategy to attract better talents as compared to others. In the above figure, we observe that all the slopes of U1, U2, and U3 are upward moving but the higher curve (U3) implies higher utility because risk of injury is a ‘bad’ job characteristics i.e. These may be inter plant, inter industries and inter regional also. In both cases, regional differentials affect the supply of manpower for various plants in different regions. The presence of noncompeting groups in society makes labour more immobile. The nature of technology being used in an organization may require different skills and knowledge or expertise which becomes the factor for determining the varying pay packages. Wages are different for different persons due to some reasons including: b. Human capital is the quantity and quality of labour and human capital development is the process of improving the quality of labour through education and training. We're here to answer any questions you have about our services. d. Difference in degree of responsibility. Cf. 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. Explain. By providing an. Economics. 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. Our mission is to provide an online platform to help students to discuss anything and everything about Economics. Its importance arises because: 1. Wage differentials have a great economic and social significance; 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. Thus, in industries dominated by industrial unions, skill differentials particularly dwindle much faster. Generally companies have found it necessary to widen the skill differences to attract the requisite skill-holders. Wage differentials have a number of implications both at macro and micro levels. Need of geographical growth for the national growth. Occupational wage differentials generally follow the changes in the relative supplies of labour to various occupations. Two factors need to be taken into account, the demand and supply for a particular category of skills and the state of prosperity of an industry or unit. Hence, workers belonging to different groups are paid at different wage rates. Compensating wage differentials provide the key to the valuation of the non-pecuniary aspects of employment. A STUDY ON WAGE DIFFERENTIAL IN THE TOURISM INDUSTRY Krupa Shah, Dr. Viji B. Christ University, Bengaluru, India. Privacy Policy3. Classification 4. To obtain a complete understanding of the job selection process and the outcomes of that process, it is necessary to consider both the employer and employee sides of the market. Those who are very sensitive to this risk will require large wage increases for any increase in risk (UH), while those who are less sensitive will require smaller wage increases to hold utility constant (UL). It can be shown in the Fig.5. Wage differentials bear a direct relationship to the diversity in occupation and industries that exist in the economic sphere of activity in a country. Registered Data Controller No: Z1821391. It serves a social need by giving people an incentive to do dirty, dangerous, or unpleasant work or a financial penalty on employers offering unfavorable working conditions. The Size of the organization determines its paying capacity, span of control, budget on human resources and competitive strength to determine the pay packages. Company offering a ‘bad’ job with no compensating wage differential would have trouble in recruiting or retaining workers which would eventually force company to raise its wage. In other words, wage differentials reflect the different degrees of scarcity of the different categories of labour; and since different categories cannot be reduced to the same degree of scarcity in the market, wage differentials are inevitable. Wage differentials reflect difference in the physical and mental abilities of workers, differences in productivity, in the efficiency of management and in consumer preferences, and act as signposts for labour mobility. They differ in abilities. Industry based differentiations refer to the wage or salary payment according to the nature of the job, types of industry, technical knowledge or expertise required, their paying capacity according to the size of the company and differential wages in similar industries or neighbouring industries. As such, they probably become an essential part of national wage policy. A wage theory based on the assumption of philosophical hedonism that workers strive to maximize utility. There are some jobs where promotion prospects are better than other jobs. iii. In other words, occupational segregation is an outcome of group-typing of employment between different groups but consumer discrimination does not cause wage differentials. At the macro level, these differentials determine the allocation of human resources and non- human resources. Q1.What do you understand by compensation differentiation? Hence, the holder of a job or an occupation gets rewarded according to the value of his contribution to the economic process. This website includes study notes, research papers, essays, articles and other allied information submitted by visitors like YOU. To pay on the basis of employees’ talents and skills, iii. Examples of such wage differentials are inter-industry, inter-firm, and geographical or inter- area wage differentials. 28(s1), pages 149-169, May. This allocation determines the growth pattern in the economic system. (c) Facilitate the most desirable rate of economic progress. The influence of collective bargaining in terms of pushing up wages in some industries and regions has been quite significant, especially in situations where collective bargaining is coupled with union strength. In some sectors of the Indian economy, particularly the large organized sector, trade unions have made full use of their/bargaining power and consequently many industrial wage differentials have become wider and have also become a source of heart burning to other employees. 4765 February 2010 Jan C. van Ours Lenny Stoeldraijer. General objectiveThe purpose of the study is to examine the major causes of wage differentials in Uganda. Employers differ in the ease (cost) with which they can eliminate hazards. There are certain jobs which involve physically heavy work, others which are strenuous but may not require very high degree of other skills, and yet again, there are certain jobs which require the workmen to work in unpleasant and dangerous conditions, like coal, miners, who have to work underground with poor ventilation and safety hazards. If it is depressed, this will have some effect on wages and consequently on the grades. It should not be treated as authoritative or accurate when considering investments or other financial products. However, there are a variety of ways in which a union-non-union wage differential can emerge. ii. "Gender Pay Differentials and Equality Legislation in the Republic of Ireland," Canadian Public Policy, University of Toronto Press, vol. I utilize unique firm-based data to examine firm-wage differentials among private firms with ten or more workers in the capital area of Guatemala City. Inter plant differentials imply the differences in pay for the same or a similar job in the same industry, while inter industry differentials are for the same or similar jobs between industries in the same locations or in the same labour market at the same time. Welcome to EconomicsDiscussion.net! Where the probability of success is uncertain, wages will be high while in case of an employee having risk and failures the wage rate will below. Compensating wage differentials - higher pay can often be some reward for risk-taking in certain jobs, working in poor conditions and having to work unsocial hours. Other factors such as advancement in technology, managerial efficiency, financial strength and age of the company influence inter industry differentials. When a particular industry or occupation offers higher wages and salaries, the economic resources are geared to develop such personnel. Besides, the chances of receiving training for better-paid occupations depend on the resources of the family. Finally, the difference in terms of a unit’s level of productivity and profitability and its influence differentials has to be considered. A doctor may start with a lower salary than a lecturer but the former can make up the deficiency by private practice. The theory of compensating differentials tells a story of how workers and firms “match and mate” in the labour market. The results in Section 4show that firm wage differentials are an important factor in the wage structure in the large-scale sector in Guatemala. The main causes of inter-firm wage differentials are: (a) Difference in the quality of labour employed by different firms; (b) Imperfections in the labour market; and. Looking for a flexible role? The Facts There is a simple way to demonstrate the existence and measure the importance of interindustry wage differentials. k. Difference in capacity of firms or industries to pay. If society decides that resources need to be allocated to production that involves undesirable work, then compensating wage differentials are necessary. Since X can produce safety more cheaply than Y, X will be a low-risk producer who attracts employees, like A, who value safety highly. The rate of dearness allowance (DA) depending on the index chosen will affect wage differentials. Social welfare activity depends, in a large measure, on such wage differentials as will: (a) Cause labour to be allocated among different occupations, industries and geographical areas in the economy in such a manner as to maximise the national product; (b) Enable full employment of the resources of the economy to be attained; and. (Explained), Wage Differentials – Concept and Definition, Wage Differentials – Functions at Micro and Macro Level, Wage Differentials – Factors Responsible for the Differences in Wages and Occupation. Wages will vary with the easiness and cheapness, or the difficulty and expense of learning a trade. Yet they may not get high rates. Q4. To satisfy the talented employees as they get higher salaries compared to low skilled employees, iv. “The industry mix varies from one area to another, and for this reason alone, the general average of wages would be expected to vary.” 22 In the second sense, they may represent real geographical differentials, resulting in the payment of different rates for the same type of work. John Friedmann and William Alonso, eds., regional development and Planning: a Reader ( Cambridge: M.I.T personnel! Skill than a clerk in the efficiency requirement in different occupations will with., inter-industry, inter-firm, inter-area or geographical differentials and personal differentials therefore, searching for the lowest category workers. To others s choice is ( WAX, RAX ) due to value!, wages, wage has to be held constant understand the compensating factors salaries to individuals having similar.... 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