Wage differentials

In any job there can be various workers doing the same as you in a different firm but there are always some slight differences between all of them. Same happens with employees doing different occupations. These differences in the wage are called wage differentials. They are common on all countries and depend on various factors.

1. Different abilities and qualifications, workers do not all have the same education, training and ability. Long study periods also cause a lower supply for some jobs and those jobs have higher wages
2. "Dirty jobs" and unsociable hours, dangerous or dirty jobs must be paid more to attract a supply of labour. Night shifts or unsociable hours must be also paid extra, this bonus payment is called the compensating differential
3. Job satisfaction, the satisfaction provided by undertaking a job can compensate relatively low wages. Nursing is a good example of this very important but low-paid jobs due to the high supply.
4. Lack of information about jobs and wages, sometimes workers earn less than they could because they are not informed of other job options for higher advantages.
5. Labour immobility, the ease wit which workers can move between different occupations and different areas of a country. If workers are mobile this means the can easily move to a higher paid job then they would move to areas with job vacancies and leave areas with high unemployment rates, this is good for the economy. It reduces regional differences in unemployment and wage rates in a country and it also increases the supply of labour to different occupations.
6. Fringe benefits, some jobs may offer lower wages but offer many more perks such as company cars or cheap travel.

Why do earnings change between people doing the same job?

1. Regional differences in labour demand and supply conditions, if there is a shortage of workers in a certain sector in an area the firms there may pay higher wages to attract workers from rival firms or other parts of the country
2. Length of service, many firms have pay increases due to experience in the company. This extra pay is a bonus for loyalty and a way of payment for extra experience and skill.
3. Local pay agreements, some national trade union companies may agree to a national wage rate for all employees. However, many workers can often agree their pay locally with employers so regional differences in the same occupation can occur.
4. Non-monetary rewards differ, some firms may offer their worker more fringe and other benefits than others. In some countries they have no taxes so for the workers they have a higher value than a higher wage.
5. Discrimination, workers doing the same job may be simply treated differently because of their sex, age, religion or race.

Further investigation on wage differentials

• Public-private sector gap, the public sector competes against the private sector to attract workers so it has to see how the wages are in the private sector. The public sector is a very big employer so it has the power to hold down their wages. Another reason for the lower wages is the higher security the public sector offers to employees and in some cases they also have higher pensions.
• Skilled and unskilled workers, this wage inequality is constantly increasing in many developed and developing economies. Less-developed economies have mostly low skilled workers working for low wages when compared to other countries. It is therefore cheaper for companies to produce goods in those countries. The demand for skills is raising and firms are competing for skilled workers. While the demand for manual unskilled workers is decreasing due to new technologies and production in less-developed countries.
• Industrial wage differentials, differences in wages between industries will also reflect differences in the labour market conditions. Regions where industries are more concentrated will have a higher equilibrium wage. Expanding industries will usually offer higher wage rates specially if there is a low supply of the workers needed. In contrast, the demand for labour in old declining industries will fall. Big union trading companies may resist to these changes.
• Gender pay gap, men have on average higher wages than women. 
• Differences in occupational distribution, women tend to work in occupations such as nursing, teaching or retailing. A sign of the problem is that the market wages for these occupations are often below many others.
• Women often take career breaks to raise children, and therefore may build up less work experience than men and have less career progression.
• More women work part-time than full-time compared to men