WAGE DIFFERENTIALS
Relative Wages
So far we were concerned with general wages. The problem of relative wages is different. Here we’ have to explain the causes of differences in wages in different employments or occupations or grades of employments and also between different persons in the same employment or grade. Wages everywhere tend to approximate to the marginal productivity of labour. But, the marginal productivity of labour is different in
different employments and grades. It varies with the degree of scarcity of each kind of labour in relation to the demand for it. or ultimately in relation to the demand for the products of each kind of labour. If there were free mubility of labour over the whole field of employment, real wage would tend to be in proportion to the relative efficiency of labour engaged in each kind of work. Real wages (not nominal wages) of workers of the same level of efficiency would tend to be the: same. If workers in one employment were getting real wages more than in proportion to their efficiency, labour would tend to move to that employment until increased supply would bring down its marginal productivity and wages. An opposite movement would take place if in an employment lower wages were paid than those justified by the relative efficiency of labour. Actually. however, labour cannot move freely from employment tu employment especially in different grades. Different grades thus tend to become “non competing groups.”

We may summarise here the causes which create differences in wages in different employments professions, and localities :

(il Oiffen’lIcl’s ill Effidellcy. These may be due to different inborn qualities, education, training and conditions under which work is performed. When eCliciellcies are different, wages must be different (ii) Existence or Non-competing Groups. As explained above, these groups arise because of thedifficulties in the way of mobility of labour from lowpaid to high-paid employments. These difficulties may be due to geographical, social or economic reasons. They may arise from lack of transport facilities, existence of family ties or caste barriers, and lack of means for better training, etc. .

(iii) Difficulty or Learning a Trade. The number oC those who can master difficult trades is small. Their supply is less than demand for them, arid their wages are highcr.

(iv) Differences in Agreeableness or Social Esteem. Disagreeable employments must pay higher wages in order to attract labourers. If, however, dis- IIgtW1bll! Wutlt eM be petfurmed by unskilled workers, who cannot do anything better (due to caste or other disabilities), wages may he quite low, e.g., sweepers in India.
(v) ,,’uttlre Prospects. If an occupation provides opportunities for future promotion, people will accept a lower start in it, as against another occupation offering higher initial rewards but no chances of rise in the future. The number of top prizes available in a profession also accounts for differences in wages,

(.’;) Hazardous and dangerous occupations generally offer higher emoluments.

(vii) Regularity or irregularity or employment also exerts a strong influence on the level of wages. Regular employment generally carries a low salary.
(viii) Collective Bargaining. The differences in the strength and militancy of trade unions also account for differences in wages in different industries. To Sum Up. We may sum up broadly the causes of differences in wages as worker’s preferences, trans- Cer costs, ranges of abilities and effects of collective bargaining.