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Wage differential

The committee on fair wages recommended that wagedifferentials should be established on the basis of certainconsiderations:

• The degree of skill

• The strain of work 

• The experience involved• The training required

• The responsibility undertaken

• The mental and physical requirement

• The disagreeableness of the task • Hazards

• Fatigue involved

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List of factors to explain wage diversity:

• The wide diff in the earning of employers

• The personnel policy of employers

• Imperfections of the labor market

• the relative bargaining strength of individual employersand local unions

•

The value of labor to an individual employer • The proportion of total cost labor costs represented by

labor cost

• Market conditions of the employers product.

•

Variation in individual performance• Fringe benefits-growing importance

• Hazards connected to a job

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Ordinarily wage differentials may arise out of the

following factors:

• Ignorance on the part of employers andemployees as to the prevailing wage rates

• Due to different systems of payment

• Due to payment of overtimes, vacations,statutory holidays, SL,

• Relative bargaining powers of employers and

employees• Due to different systems of payment

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The nature and extent of wage differentials areconditioned by a set of factors such as:

• The condition prevailing in the market

• The extent of unionization

• Relative bargaining power of employer and employee

• The rate of growth of productivity

• The extent of authoritarian regulations and thecentralization of decision making

• The customs and traditions

• The general economic, industrial and economic

conditions in the country.

• Prevailing rates of wages

• Capacity of an industry to pay

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Common types of wage differentials:

Occupational, skill, interplant, inter industry,

regional/geographical and gender differential.Occupational wage differentials:

Diff in tech advancement, managerial efficiency,

structure of product market, financial capacity,

availability of raw materials and power , transport

facilities are some of the significant variables that

influence interfirm wage rates.

•Skilled semiskilled and unskilled

• Occupations requiring greater skill, experience, and

efforts are paid higher 

• Diff in blue collar and white collar 

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• Skill differential.

• Inter industry :Industries with large no of skilled

workers pay high. Developing and expandingcapital intensive industries pay higher thanother labor intensive industries.

•

Regional wage diff: most imp factors indetermining regional wage diff are capacity topay, product market(monopolistic orcompetitive) besides these factors:

• Abundance of natural resources, diff in laborproductivity, diff in cost of living, rate of capitalformation, unionization, urban or rural area,labor supply, social barriers, family ties etc.

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• Gender differential

• Sector differential

• Standardization of wage scheme