Why wage differentials

Inter-firm Differentials 3. Regional Differences 4. Inter-Industry Differences 5. Personal Wage Differences. As there are individual differences, so are wage differentials also. An organisation offers different jobs, thus, differentials in wages for different jobs are inevitable. Wage differentials are also known as inter-industry, inter-firm, inter-area or geographical differentials.

Occupations in an organisation widely differ from one another in terms of skill requirement and the extent of requirement and the extent of responsibility. Accordingly, wages vary from occupation to occupation. It is varying skill requirement for different occupation that shapes the manpower planning in an organisation-be it an industrial organisation or educational institution. There are wage differentials of workers in different plants in the same area and occupation.

Not only wages differ among occupations, but these also differ in case of workers working in the same occupation at different geographical regions. These differences are the result of working conditions prevalent in different regions of the country For example; the Central Government employees serving in the remote and disturbed areas like the North Eastern States of India are paid additional remuneration in the form of the Remote Area Allowance.

Sometimes, such wage differentials are used to attract people to serve in particular regions. These differences in wages surface in case of workers working in the same occupation and the same area but in different industries.

Lazear, E. Levy, F. Lydall, H. Lynch, L. Martin, A. Gourevitch et al. Milgrom, P. Mincer, J. Murphy, K. Odaka, K. Ohashi, I. Ohta, S. Ohashi and T. Spence, M. Swenson, P. Tachibanaki, T. London: Edgar. Tachibanaki ed. Teulings, C. Topel, R. This fact sheet focuses on wage gaps between women and men because that is how the data have historically been collected and analyzed. However, as discussed throughout the text, more comprehensive data are needed to gain a clearer picture of all wage gaps in the workforce.

Specific tables used are on file with the author. Calculations are based on median annual earnings data from American Community Survey 1-year estimates, whereas the cent figure for Asian women overall is based on median annual earnings data from the Current Population Survey. Francine D. Blau and Lawrence M. Figures are not adjusted for inflation and earnings are in dollars.

The cumulative earnings gap reported compares monthly labor force totals for all four fiscal quarters of and BLS median usual weekly earnings of full-time working women and men of all races from all four fiscal quarters of For quarterly earnings for women and men overall, see U. See Paycheck Fairness Act, H.

You Might Also Like. Aug 13, Jocelyn Frye. In the UK, the gap between the earnings of skilled and unskilled workers has risen in recent years, mainly for two reasons:. Technological change and the new economy have increased the productivity of many skilled workers. The application of IT is often more possible in skilled occupations compared with unskilled ones. International trade and globalisation have had a significant downward impact on the pay of the unskilled. In contrast, the skilled, especially those in the service sector, are generally less adversely effected by global competition.

The recent financial crisis has meant that the financial services sector has experienced difficulties in terms of pay, but the skills gap and resultant pay gap is unlikely to narrow in any significant way.

Wage levels can also be affected by job discrimination, which means that groups of worker are denied access, or have limited access, to jobs or to higher paid elite jobs. Workers can suffer discrimination because of their:.

Discrimination is considered a labour market failure, and its effect is to reduce the supply of labour into a given profession, and drive up the pay of the elite workers. This leads to a relative increase in supply of workers available for the non-elite jobs and depresses their wages. Wage differentials can, therefore, be sustained by the practice of discrimination. Labour market segmentation refers to the tendency for modern labour markets to be composed of smaller sub-markets, rather than being one homogeneous market from which all firms hire their labour — which is the traditional, neo-classical, view of labour markets.

In contrast, segmentation theory stresses that labour markets are composed of a set of differentiated sub-markets. Although individuals in different sub-markets may seek work in the same industry, each sub-market has very different characteristics. In addition, it may not be easy for individual workers to move from one sub-market to another. Two particular sub-sectors have been widely studied, and form part of is called dual labour market theory.