Before considering the differences in
earnings, let us think about some economics terms and
relationships related to wages.
Money wage is the
amount of money received as wage; whereas Real wage is the sum total of goods and services that the money
wages will buy.
Wage rate is the wage at which the
demand for labour is equal to the supply of labour. Demand for and
supply of labour will determine the wage rate. At the same time availability of
labour depends on the wage rate. Other things being equal, demand for labour is inversely related to the
wage rate. But demand for labour will reduce by the introduction of
labour saving machinery.
For producers, an increase in productivity may
offset the effect of increase in the wage rate. More workers
will be demanded, if the relative productivity is greater than the increase in
wage.
Based on the mode
of payment wages may be classified in to the following.
(1) Basic wage
is the minimum amount to be paid for the agreed period of work.
(2) Bonus is
a part of wage related to the productivity of labour.
(3) Over time
allowance is the payment for the work in excess of the standard
period of work.
(4) Piece rate
is the payment of wage for the fixed part of work done by the worker.
There are differences in the wages paid to people in
different occupations. These differences are known as wage differentials.
The
differences in earnings may
be due to the following reasons
(1)
The differences in earnings between males (relatively more earning)
and females. There may be gender
discrimination also against female workers. [Governments are attempting to reduce inequalities through
legislation]
(2)
The importance of skills are in relation to the demand for and supply of
labour. The differences in the earnings of skilled and unskilled jobs are
mainly because of education, training and experience. [Skilled workers are
shorter in supply but they are highly demanded than unskilled]
(3)
The significant differences in the pay of private and public sector employees
(4)
Typical wages in different parts of the three economic sectors (primary, secondary and tertiary)
(5)
Difference in age is another
factor in difference in earning as age increases the individuals is getting
more aware of the responsibilities,
risks bearing ability and more experienced
(6)
The immobility of labour is another recognised factor for wage differences
(6)
Another important factors are the inherent talent and ability.
There
are tremendous changes took place in
the recent years in the nature of the labour force around the world. The
Significant changes in the nature of the labour force include:
(1) A rise in the part time
employment
(2) A rise in temporary employment
(3) A rise in the participation of
women in the workforce.
(4) A change in the pattern of
employment.
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