Wage Differentials Due to Locality Compensation Management

Prepared By

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Manu Melwin JoyAssistant Professor

Ilahia School of Management Studies

Kerala, India.Phone – 9744551114

Mail – manu_melwinjoy@yahoo.com

Wage differentials

• The wage paid to workers

varies greatly. These wage

differentials are mostly the

result of differences in

worker ability and the

workers' effort in performing

the job.

Wage differentials• There are also wage

differentials across occupations, because of differences in the demand and supply of laborers for particular job or occupation. These differences arise primarily because of differences in the amount of education or training required and in the desirability of the job itself.

Wage Differentials Due to Locality

• For any given type of job,

wages are usually higher in

one locality than in others.

Much of this difference is

because of differences in the

cost-of-living.

Wage Differentials Due to Locality • However, most people are

reluctant to move because they do not want to leave their friends, sell their house, be subjected to the cost and uncertainty of a new job in a new community, and the children may not want to change schools.

Wage Differentials Due to Locality

• People may also be unwilling

to give up pension plans,

health insurance, or seniority

at their current job. Hence,

wage differentials in different

localities may persist, even if

people know that higher

wages can be earned

elsewhere.

Wage Differentials Due to Locality • The requirement for

occupational licensing may also be an impediment to moving to a different area for higher wages. Many occupations require state licensing, such as law and medicine, so if a licensed worker wanted to move to a new state, she would have to obtain a new license and may have to satisfy additional requirements.