wage differential

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Wage Differential

The difference in wage or salary between two employees of different classes who perform the same work. Examples of classes include age, gender, race, religion or even union and non-union membership. Wage differentials may be legal in some circumstances, but are generally illegal when based on gender, ethnicity, sexual orientation and similar classes.

wage differential

see PAY DIFFERENTIAL.

wage differential

the payment of a different WAGE RATE to different groups of workers. Wage differentials arise from three main factors:
  1. differences in inter-occupational skills, training and responsibilities (surgeons are paid more than nurses, managers are paid more than labourers);
  2. differences in inter-industry growth rates and PRODUCTIVITY levels (high-growth, high-productivity industries pay more than declining or low-productivity industries);
  3. differences between regions in income per head and local employment levels (prosperous areas in general pay more than depressed areas).

Wage differentials that encourage greater labour MOBILITY between occupations and industries and promote high levels of productivity play an important part in bringing about a more effective use of labour resources. On the other hand, some wage differentials contribute to both economic and social distortions, in particular those that reflect racial or sexual discrimination and the exploitation of workers by powerful employers (‘sweat-shop‘labour). By the same token, ‘unjustified‘wage differentials arising out of the abuse of trade union monopoly power equally mitigate against the best use of labour resources.

References in periodicals archive ?
The economy-wide equilibrium (zero job rotation) and the target of reaching minimum associated costs to wage differentials, requires wages in firm ( ) to be equal to wages of its corresponding industry (j) and an alternative industry (k):
Overall, controlling for stayers and their demographic characteristics goes a long way toward reconciling the cross-section and panel estimates of the marital wage differential for white men, as the level effects across movers within the cross-section estimates do not appear to contribute substantially to the estimated marital wage differentials.
Human capital theory seeks to explain wage differentials as a consequence of differing human capital stocks that determine an individual's marginal productivity.
Oaxaca, Male-Female Wage Differentials in Urban Labor Markets.
The objective of this study is to estimate a multiple or a double sample selection bias adjusted wage model and examine the extent to which these biases account for the difference in the black and white wage differentials. In the "The Model" section, we provide a detailed discussion of a model that incorporates two sources of sample selection bias in the wage equation.
Regarding wage differentials, we found that if unemployment increases by 10%, formal-informal wage differentials increase by 24%.
Clark and Cosgrove (1991) examined the persistency of interregional wage differentials. They found evidence that supports both the human capital approach of Sjaastad and the compensating differentials model of Roback.
The upshot of these changes was that the wage structure and educational wage differentials narrowed from 1915 to 1980, especially from 1915 to 1950.
Unfortunately, previous research on wage differentials does not take into account examining wage returns to graduate education, but using existing research on the overall compensation of nonprofit employees I hypothesize that even those employees who hold graduate degrees will be compensated less for this education than their for profit counterparts.
The study, The evolution of male-female wage differentials in Canadian universities: 1970 to 2001,is part of the New Realities of Gender in Canadian Society project, organized by the Family and Labour Studies Division at Queen's and is available online at: www.econ.queensu.ca/working_papers/ papers/qed_wp_1099.pdf.
(1) If average industry wage differentials in IT-producing industries are substantially lower after controlling for IT occupation, this finding will reinforce the notion that occupation wage differentials are an important source of the observed wage premium accruing to workers in IT-producing industries.
It indicates that some 80 percent of American boards of directors have responded to such wage differentials by discussing outsourcing offshore.