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


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 ?
This paper finds suggestive evidence that low-skilled immigrants have different compensating wage differentials compared to native workers.
Furthermore, the four previously-defined terms of the BMZ and DGSX methodologies are grouped and specified as the wage offer gap or the unconditional wage differential.
The largest wage differential cannot be attributed to observable differences in human capital.
Baron and Cobb-Clark, 2010) A significant characteristic of the gender wage differential is its advancement throughout the life cycle as a role of labor market experience.
Once controls are included for the measured attributes, the log-linear approach gives an intersector wage differential of 13%, whereas the three QMLE methods estimate intersector wage differentials of about 2%.
In Harris and Todaro's (1970) view, mobility, rather than being determined by wage differential alone as in Ravenstein's theoretical model is determined by the expected wage differential; that is, the wage differential x probability of finding a job product.
Hypothesis 3: The wage differential between minority and whites is lower for nonprofit employees than for profit employees.
More precisely, a positive relationship between intra-industry wage differential and firm's job rotation is found.
Technically, such individuals contribute to the identification of the cross section but not the panel estimates of the marital wage differential.
Mr Ramsey said: "[This] represents the highest public-private wage differential of all the UK regions.
Wage differential due to employer size is one of the key areas of interest in labour market research because a strong positive relationship between employer size and wages has been observed in developed and developing countries.