Wage differentials bear a direct relationship to the diversity in occupation and industries that exist in the economic sphere of activity in a country.
A certain job requiring a certain skill is paid more or less than another job requiring a different skill either in the same or some other industry.
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.
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.
1. Meaning of Wage Differentials 2. Concept and Definition of Wage Differentials 3. Classification 4. Importance 5. Functions 6. Factors 7. Compensation 8. Causes and Effects 9. Occupational Wage Differentials and 10. Wage Differentials in India.
Wage Differentials: Meaning, Concept, Importance, Types, Causes, Effects and Occupational Wage Differentials
Wage Differentials – Meaning
Wage differentials bear a direct relationship to the diversity in occupation and industries that exist in the economic sphere of activity in a country. A certain job requiring a certain skill is paid more or less than another job requiring a different skill either in the same or some other industry. There are a variety of contributory factors.
There is a need to understand the reasons for these differences as in many cases there is a constant adjustment taking place in order to maintain the existing disparity, for instance, between the skilled and unskilled or semiskilled workers; between the officers and the supervisory or clerical staff and so on.
When there is a variation in workers’ skills, i.e., highly skilled, skilled, semi-skilled and unskilled, their wage rates will differ. The variance is due to the complexity of the skill acquired, its scarcity, and the time taken in training to acquire it. The unskilled category which requires none of these is relatively less well paid.
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. Yet they may not get high rates.
The economic factors or abundance of such workers may alter their bargaining strength. When the coal industry was replaced by oil, because of its lack of modernization, the wages of the coal-miners were depressed. 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.
If it is depressed, this will have some effect on wages and consequently on the grades. The rate of dearness allowance (DA) depending on the index chosen will affect wage differentials. In many situations, arbitration or judicial pronouncements have favored a higher quantum for the lowest category of workers.
On a wide scale, there has not been a systematic attempt at job evaluation – an exercise which would have identified the differences in terms of skill training experience, etc. between jobs and provided for relative weightages which could lead to standardization and eradication of distinctions for the same type of jobs.
In the modern organized sector, where collective bargaining is prevalent, there is a trend towards job evaluation schemes. 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.
Finally, the difference in terms of a unit’s level of productivity and profitability and its influence differentials has to be considered. If both productivity and profitability are high, then the wages sought and given are correspondingly bound to be high.
Salary differentials perform important economic, functions like labour productivity, attracting the people to different jobs. Since most of the workers are mobile with a view to maximising their earnings, wage differentials reflect in variations in productivity, efficiency of management, maximum utilisation of human force etc.
Attracting efficient workers, maximisation of employee commitment, development of skills, knowledge, utilisation of human resources, maximisation of productivity can be fulfilled through wage differentials, as the latter determines the direct allocation of manpower among different units, occupations and regions so that national production can be maximised. Thus, wage differentials provide an incentive for better allocation of human force, labour mobility among different regions and the like.
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. Development of new skills, knowledge etc., is an essential part of human resource development.
Shortage of technical and skilled personnel is not only a problem for industries but it creates bottlenecks, in the attainment of planned goals. Thus, wage differentials to certain extent, are desirable from the view point of national interest. As such, they probably become an essential part of national wage policy. Complete uniform national wage policy is impracticable and undesirable.
Wage Differentials – Concept and Definition
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 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. 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.
We will get different terms as occupational wage differentials, inter-industry, inter-firm, inter-area or geographical differentials and personal differentials because wages differ in different employments or occupations, different industries and localities, and even between the persons in the same employment or grade, etc.
Salary differentials on the basis of occupations, units and areas (when real wages are taken into account) can be justified on the basis of equal pay for equal work among workers. They are also justified in view of varying conditions of demand and supply and varied job requirements like skill, knowledge, aptitude, ability, experience etc. But the object of the Government is to minimise income inequalities and inequalities in the distribution of wealth.
Thus, wage differentials are not desirable in a socialistic pattern of society. However, formulating uniform wage policy ignoring differences in individual skills, knowledge etc., units ability to pay, varying living costs in different regions, varying demand and supply conditions, differences in occupations etc., is practically not possible. Hence, a compromise between uniform wage policy and wage differentials has to be developed in view of the principles of socialistic pattern of society.
Inter-personal, inter-unit, inter occupational wage differentials are more predominant in unorganised sector of Indian economy. But even in organised sector and public sector units, wage differentials are quite common. But the tendency appears to be towards minimisation and regularisation of personal wage differentials and to narrow down the gap between maximum and minimum wage in a unit.
Wage differentials on the basis of sex are however common mainly in unorganised sector of the economy. It is observed that certain industrial tribunals had awarded different wages for male and female workers not on the ground that the work done is unequal but on the grounds that the wages of female employees have always been somewhat lower than those of male workers, that women workers support a smaller family and that the cost of employing women workers is higher. However, it is felt that further steps should be taken in order to minimise wage differentials not only in unorganised sector but also in organised and public sector undertakings.
Wage Differentials – Types
Wages differ in different employments or occupations, industries and localities, and also between persons in the same employment or grade. One therefore comes across such terms as occupational wage differentials, inter-industry, inter-firm, inter-area or geographical differentials and personal differentials.
Wage differentials have been classified into three categories:
i. First, the differentials that can be attributed to imperfections in the employment markets, such as the limited knowledge of workers in regard to alternative job opportunities available elsewhere; obstacles to geographical, occupational or inter-firm mobility of workers; or time-lags in the adjustment of resource distribution and changes in the scope and structure of economic activities. Examples of such wage differentials are inter-industry, inter-firm, and geographical or inter- area wage differentials.
ii. Second, the wage differentials which originate in social values and prejudices and which are deeper and more persistent than economic factors. Wage differentials by sex, age, status or ethnic origin belong to this category.
iii. Third, occupational wage differentials, which would exist even if employment markets were perfect and social prejudices were absent.
Type # 1. Occupational Differentials:
These indicate that since different occupations require different qualifications, different wages of skill and carry different degrees of responsibility, wages are usually fixed on the basis of the differences in occupations and various degrees of skills.
The basic functions of such differentials are:
(a) To induce workers to undertake “more demanding”, “more agreeable or dangerous” jobs, or those involving “a great chance of unemployment, or wide uncertainty of earnings.”
(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.
(c) To perform a social function by way of determining the social status of workers.
In countries adopting a course of planned economic development, skill differentials play an important role in manpower and employment programmes, for they considerably help in bringing about an adequate supply of labour with skills corresponding to the requirements of product plans.
Inter-occupational differentials may comprise skilled, unskilled and manual wage differentials; non-manual and manual (white and blue-collar); and general skill differentials. Occupational wage differentials generally follow the changes in the relative supplies of labour to various occupations.
Type # 2. Inter-Firm Differentials:
Inter-firm differentials reflect the relative wage levels of workers in different plants in the same area and occupation.
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
(c) Differences in the efficiency of equipment, supervision and other non-labour factors.
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. Lack of co-ordination among adjudication authorities, too, is responsible for such anomalies.
Type # 3. Inter-Area or Regional Differentials:
Such differentials arise when workers in the same industry and the same occupational group, but living in different geographical areas, are paid different wages. Regional wage differentials may be conceived in two senses. In the first sense, they are merely a part of inter-industry differentials in a particular region.
“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. In both cases, regional differentials affect the supply of manpower for various plants in different regions.
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 some cases, regional differentials are also used to encourage planned mobility of labour.
Type # 4. Inter-Industry Differentials:
These differentials arise when workers in the same occupation and the same area but in different industries are paid different wages. Inter-industry differentials reflect skill differentials. 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.
Other factors influencing inter-industry differentials are the extent of unionisation, the structure of product markets, the ability to pay, labour-capital ratio, and the stage of development of an industry.
Type # 5. Personal Wage Differentials:
These arise because of differences in the personal characteristics (age or sex) of workers who work in the same plant and the same occupation. “Equal pay for equal work” has been recommended by the I.L.O. Convention (No. 100), as also by Industrial Courts, Labour Tribunals, the Minimum Wages Committee and the Fair Wage Committee. But in practice this principle has not been fully implemented because in occupations which involve strenuous muscular work, women workers, if employed, are paid less than men workers.
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.
Wage Differentials – Importance
Wage differentials have a great economic and social significance, for 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.
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
(c) Facilitate the most desirable rate of economic progress.
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. By providing an important incentive for labour mobility, they bring about a reallocation of the labour force under changing circumstances.
Under competitive conditions, wages are determined by conditions of demand (which reflect the productivity of workers) and conditions of supply (which reflect the attractiveness of jobs). The level of wages would depend upon the relative scarcity of supply in relation to demand. 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.
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 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.
(b) The existence of non-competing groups due to difficulties in the way of the mobility of labour from low paid to high paid employments.
(c) Differences in the agreeableness or social esteem of employment.
(d) Differences in the nature of employment and occupations.
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.
The prevailing rates of wages, the capacity of an industry to pay, the needs of an industry in a developing economy, and the requirements of social justice also directly or indirectly affect wage differentials.
Wage Differentials – Functions at Micro and Macro Level
Wage/salary differentials have a number of implications both at macro and micro levels. At the macro level, these differentials determine the allocation of human resources and non- human resources. This allocation determines the growth pattern in the economic system.
When a particular industry or occupation offers higher wages and salaries, the economic resources are geared to develop such personnel. 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.
At the micro level, wage/salary differentials show that some organizations use proactive strategy to attract better talents as compared to others. They become trend-setters rather than play the role of followers. These trend-setters set pattern not only in relation to recruitment of better personnel but in terms of other human resource management practices too.
Wage differentials under market economies should exist in order to perform the following functions:
i. To attract the talent and skilled people. Talented candidates get six figure salaries.
ii. To pay on the basis of employees’ talents and skills
iii. To satisfy the talented employees as they get higher salaries compared to low skilled employees
iv. To allow the companies to build distinctive competences
v. To encourage less skilled employees to develop their skills and other human resources in order to get higher pay
vi. To discriminate highly committed from less committed and positive attitude employees from negatives
vii. To maximise organisational productivity and efficiency.
Wage Differentials – Factors Responsible for the Differences in Wages and Occupation
The following important factors are responsible for the differences in wages between occupations:
Factor # 1. Difference in Efficiency:
All persons are not equally efficient. They differ in abilities. Some are more efficient and some are less efficient. Some others are not efficient at all. An efficient worker gives better output. Hence, he is paid higher wages than others. Moreover, the efficiency requirement in different jobs varies.
A doctor requires more skill than a nurse does. A district collector is entrusted with heavy responsibilities and the job necessitates ability and intelligence. On the contrary, the job of a sweeper does not require them. Hence, wages differ between occupations.
Factor # 2. Presence of Non-Competing Groups:
Society is divided into a number of working groups, which are noncompeting. Caste system creates such groups in India. As a result, a child born to a sweeper will most likely be a sweeper just as a black smith’s son will be a black smith.
Besides, the chances of receiving training for better-paid occupations depend on the resources of the family. Thus, inheritance, environment, training and sex are some factors, which create noncompeting groups in the society. Hence, workers belonging to different groups are paid at different wage rates.
Factor # 3. Immobility of Labour:
Labour is not perfectly mobile. They are normally shy to move. It has inertia to stick to one job. Sometimes, people are not prepared to accept higher wages if it necessitates a change of place. This accounts for difference in wage in different places. The presence of noncompeting groups in society makes labour more immobile. Political barriers against the free movement of labour from one country to another result in the difference in wages in different countries.
Factor # 4. Nature of Employment:
The nature of work also influences wage rates. Dangerous and disagreeable work brings higher money wages to attract larger supply of labour. For example, a coal miner gets higher wages than a clerk in the office. High money wages act as compensation.
Factor # 5. Training and Qualification:
Jobs requiring special qualification and apprenticeship generally command higher wages than jobs learnt easily and for which no special training is required.
Factor # 6. Productivity:
This differs in different occupations. The Cobbler’s job is not as productive as that of a skilled motor mechanic or of clerk as that of a principal of a college.
Factor # 7. Regularity of Employment:
If there is regular employment in a job, one may demand lower wages. If the job is irregular or seasonal, wage has to be higher. In case of India, young men prefer low paid jobs under government due to security and regularity of employment to irregular and insecure private jobs with more remuneration.
Factor # 8. Future Prospects:
There are some jobs where promotion prospects are better than other jobs. Even if initial salary is low, if promotion prospects are there people prefer these jobs to others jobs.
Factor # 9. Scope for Extra Earning:
If a job has scope for extra earnings, the regular wage may be lower. A doctor may start with a lower salary than a lecturer but the former can make up the deficiency by private practice.
Wage Differentials – Wage Differentials in Compensation Management (With Diagrams)
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. Compensating wage differentials provide the key to the valuation of the non-pecuniary aspects of employment.
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 labour market.
Workers’ and Firms’ Choice with Risky Jobs:
Let us take an example to understand the compensating differentials. Suppose there are two employers- Employer X and Employer Y. Employer X is offering Rs. 10 per hour in a very clean and safe work conditions. On the other hand, Employer Y is offering Rs. 10 per hour in a dirty and noisy factory. In this case, most workers would undoubtedly choose employer X.
If employer Y decides not to alter working conditions, it must pay wage above Rs. 10 per hour to be competitive in the labour 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 will be no forces causing the differential to change.
Purpose of Compensating Wage Differential:
It fulfils two basic purposes.
These are as follows:
i. 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.
ii. 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 pay.
Theory of Compensating Wage Differential:
The compensating wage differential theory is based on three assumptions.
These are as follows:
i. Utility Maximization:
Workers seek to maximize their utility, not their income. Compensating wage differentials will only arise if some people do not choose the highest-paying job offered, preferring instead a lower-paying but more pleasant job.
ii. Worker Information:
Workers are aware of the job characteristics. 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.
iii. Workers’ Mobility:
Workers have a range of job offers from which they can choose. It is the act of choosing safe jobs over dangerous ones that forces employers offering dangerous work at higher wages.
The Hedonic Wage Function:
A wage theory based on the assumption of philosophical hedonism that workers strive to maximize utility. To simplify our discussion, we shall analyze just one dimension i.e. risk of injury on the job. 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.
Some combinations of wage rates and risk levels that would yield the same level of utility can be represented by indifference curve.
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. if risk increases, wage must rise if utility is to be held constant.
People differ in their aversion to the risk of being injured. It can be shown in the Fig.5.
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).
Employer Considerations are based on the following assumptions:
i. It is presumably costly to reduce the risk of injury facing employees.
ii. Firms operate at zero profit at Perfect competition,
iii. All other job characteristics are presumably given or already determined.
If a firm undertakes a program to reduce the risk of injury, it must reduce wages to remain competitive. 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.
The employer trade-offs between wages and levels of injury risk can be graphed through the use of isoprofit curves, which show the various combinations of risk and wage level that yield a given level of profit. This is shown in Fig.6.
Here, the concavity of Iso-profit curves is a representation of our assumption that there are diminishing marginal returns to safety expenditures. The cost of reducing risk levels is reflected in the slope of the Iso-profit curve.
Employers differ in the ease (cost) with which they can eliminate hazards. It can be understood from the following diagram.
From the above diagram, it is clearly shown that Firm X can reduce risk more cheaply than firm Y.
Matching of Employer and Employees:
Graphing worker indifference curves and employer Iso-profit curves together can show which workers choose which offers.
In the above diagram, A’s choice is (WAX, RAX) due to higher value of safety. On the other hand, B’s choice is (WBY, RBY).
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. Y attracts people like B, who have a relatively strong preference for money wages and a relatively weak preference for safety.
Wage Differentials – Causes and Effects
Wages are different for different persons due to some reasons including:
a. Difference in efficiency of workers.
b. Difference in qualification, skills and experience.
c. Difference in occupations.
d. Difference in degree of responsibility.
e. Difference in complexity of work.
f. Difference in nature of employment.
g. Difference in market conditions.
h. Difference in extent of unionisation.
i. Difference in bargaining power of employers and workers.
j. Difference in productivity of workers.
k. Difference in capacity of firms or industries to pay.
l. Extent of social justice.
Effect of Wage Differentials on Trade Unionism:
Trade Unions’ policies in respect of wage differentials are of diverse nature. While agitating against many of the differentials trade unions patiently cling to the maintenance of many others. All workers want to secure absolute improvement in their positions and no group likes the undermining of its relative position.
The craft unions, of course, seek to maintain and improve, if possible, their relative position in the wage hierarchy. 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. Thus, in industries dominated by industrial unions, skill differentials particularly dwindle much faster.
Similarly, when the unions develop the practice of industry wide collective bargaining or when industry wide wage boards and adjudication tribunals functions the inter-plant and regional differentials tend to disappear. This has been the common experience in India.
When the trade unions intend to take labour out of competition, i.e., prevent employers from competing at the cost of labour in the product market, it is but natural for them to organize all competitors and equalize the labour cost for them. In this process, the inter-plant differentials tend to disappear.
But if on the other hand, it is customary to have the plant as the unit of collective bargaining and different plants organized by different unions’ inter-plant differentials in an industry tend to get entrenched and even magnified depending upon the paying capacity of the plant and bargaining power of the union.
The existence of inter-firm or inter-plant differentials in an industry even in the same locality is a common experience, wage rates varying directly with the size of the firm, whether having common rates for the same industry irrespective of the size, position and profitability of the different concerns will be more gainful for the workers or whether adjusting wage rates according to the paying capacity of each firm and also being the bargaining power of the union will be more advantageous— is a question, the answer to which differ from industry to industry. But the trade unions have found it politically expedient in most cases to go in for uniform wage rates in an industry.
The influence of trade unions on sex racial or caste prejudices has been against their continuance.
As regards industrial wage differentials, the bargaining power of the trade unions has been of crucial importance. 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. The banking, insurance and air transport have become examples for others to emulate.
In respect of union and non-union wage differentials there are conflicting evidences in the industrially advanced countries. However, many economists support the thesis that the unionized workers receive 10 to 15 per cent higher pay than unorganized workers. In India, as has been said unionization has exerted a much more pervasive influence pushing up wage rates in those sectors and industries where union power is great.
Wage Differentials – What is Occupational Wage Differentials? (Explained)
Under the competitive model with perfect competition, perfect knowledge and free mobility of labour and capital, it was assumed that most of these differentials would disappear except for those which were related to the differences in the basic nature of job or occupational requirements.
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. Therefore, invariably all discussions on wage differentials begin with statement of Adam Smith advancing five explanations of occupational wage differentials.
1. Wages will vary with the ease or hardship, the cleanliness or dustiness, the honourableness, or dishonorableness of the employment.
2. Wages will vary with the easiness and cheapness, or the difficulty and expense of learning a trade.
3. Wages in different occupations will vary with the regularity or irregularity of employment.
4. Wages will vary with the degree of trust reposed in an occupation.
5. Wages will vary according to the probability of success in the occupation.
Adam Smith refers to the focal differences in the nature of occupations and also to the compensating factors. That is, even when the knowledge of the market conditions is perfect and entry and exit, of labour is free, differences in wages will persist in order to invoke the supply of the relevant quality and quantity of labour required for different jobs.
From this point of view, wage differentials are rational and economically justified to attract sufficient labour of requisite quality according to the needs of the occupation, industry and region.
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. Hence, the holder of a job or an occupation gets rewarded according to the value of his contribution to the economic process.
Wage Differentials in India
Due to the paucity of relevant data on wage differentials, it is not possible to analyse them in India; yet the main features of the Indian wage structure may be stated thus- “As a characteristic of the unorganised labour market, personal differentials because of job selling, individual bargaining and wage discrimination have tended to persist in India, especially in the unorganised sector of the economy, and even in the organised and unorganised sectors in industry.”
The tendency appears to be towards the elimination of wage differentials because of government interference through the fixation of the minimum wages and, of late, through the appointment of Wage Boards and pressures from trade unions. Wage differentials by sex are quite common.
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.”
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. Of late, however, there has been a tendency towards the elimination of inter-firm differentials. The forces which tend to eliminate interpersonal differentials in the country operate in this case as well.