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The right to equality is one of the six rights that have been granted to the Indian citizens.
The State shall not discriminate against any citizen on grounds of religion, race, caste, sex,
place of birth or discrimination against any individual in respect of, any employment etc.
However this particular Right to Equality applies practically to the State owned Offices
where people with similar kind of Positions & Qualifications are given similar compensation
for similar kind of Jobs and not in the Private Job s. Thus, there exists a lot of Inter & Intra
Wage Diffrentials throughout the Industry.

Different wages paid to different workers or in different markets adjust for differences in
the jobs or in the productivity of the workers. Wage differentials occur for many reasons.
Quite often they are the result of the personal preferences of workers. In some cases
workers are willing to "buy" leisure-time or other types of household production by taking
lower wages. Differences in job risks, education, and location are also reasons for the
persistence of wage differentials.

Wage Diffrentials that exists between the Industry are termed as c

  
 
  ,
whereas those that exist between various organization in an industry is termed c   


  If we talk about the Iron Industry then we can find wage diffrentials within the
industry like Tata Steel Limited CEO H.M Nerukar gets the compensation of 7,103,00 per
year. Jindal steel CEO Naveen Jindal recieves renumeration of Rs 39.70 Crore.
LakhmipatiMittal is the CEO of Arcelor Mittal Steel & is the richest man in Europe and the fifth
richest in the world with a personal wealth of US$ 28.7 billion or £19.3 billion. The MD of Ispat
Industries Limited Vinod K. Mittal gets an annual Salry of 44,700,000 INR.

Talking about the top paid 5 CEOs in India, the trend shows wage diffrentials that exist
betwen various industries i.e. c
c  

  .

1. Naveen Jindal - Naveen Jindal is the executive vice-chairman and managing director of Jindal Steel
to their annual remuneration is Rs 39.70 crores.

2. Kalanithi Maran - Managing Director and Acayyaramen Kalanithi Maran of Sun TV in India and his
annual remuneration is Rs 37.08 crores.

3. Kaveri Maran - Joint Managing Director of Sun TV and her annual remuneration is Rs 37.08 crores.

4. Pawan Munjal - India's number one motorcycle maker Hero Hoda, CEO and managing director and
his annual remuneration is Rs 30.88 crores.

5. Brij Mohan Lall Munjal - Hero Honda Group's founder and his annual remuneration is Rs 29.5
crores.
Some employers find it necessary to pay higher wages to compensate workers for dirty,
dangerous, and generally undesirable working conditions. Other employers can pay less for
comparable work because conditions are more pleasant.

Three reasons for compensating wage differentials are worth noting:

À|  Jobs that are riskier, more dangerous, and have a

greater likelihood of injury, typically pay higher wages. For example, coal miners,
deep sea divers, and security guards are likely to be paid higher wages than similar
jobs due to the hazardous nature of their duties.
À|   Jobs that require more education, skill, and training also tend to
pay higher wages. Higher wages compensate for greater productivity an d provide
returns on investment in education and training.
À|  Jobs that are at undesirable, more distant, or hard to reach locations also
pay higher wages. Firms in cities that have high living costs, inhospitable climates,
high crime rates, or other "disamenities" find it necessary to offer higher wages to
attract workers.

The World is aware of the fact that similar workers earn very dissimilar wages while working
for different employers. Researches have cleared the existence of inter- and intra-industry
wage differentials for similar workers within & Outside India. The work of post-war neo-
institutional labor economists such as Richard Lester (1952), Lloyd Reynolds (1949), and
Sumner Slichter (1950) theorized about and offered empirical evidence in support of the
claim that firms possess different pay policies. Contemporary economic theorists (Shapiro
and Stiglitz 1984) and empirical labor economists (Dickens and Katz, 1987; Groshen 1991;
Groshen and Krueger 1990) have returned to these same themes. Now sophisticated
empirical techniques and far better data allow us to say with virtual certainty that wage
differences across workers exists throughout world & is difficult to avoid.

Neoclassical economics models of perfectly competitive labor markets hypothesize that pay
differences across workers are entirely accounted for by the human capital characteristics of
workers, the quality of the working conditions under which they labor, a nd the non-wage
components (e.g., fringe benefits) of the compensation package. This analysis dates back to
the pioneering work of Adam Smith and the so -called theory of compensating differentials.

 
c c
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The Theory has the following assumptions:-

1. | The model of competitive labor markets implies that as long as workers or firms can
freely enter and exit the marketplace, there will be a single wage in the economy if
all jobs are alike and all workers are alike .
 2. | All jobs are not the same. Adam Smith in 1776 argued that compensating wage
differentials arise to compensate workers for the nonwage characteristics of jobs. It
is not the wage that is equated across jobs in a competitive market, but the ͞whole
of the advantages and disadvantages͟ of the job.
3. | Workers differ in their preferences for job characteristics and firms differ in the
working conditions that they offer. The theory of compensating differentials tells a
story of how workers and firms ͞match and mate͟ in the labor market.
4. | E.g. #$%
&! Rs. 100 per hour for, clean, safe work conditions
#$%
! Rs 100 per hour for, dirty, noisy factory
ї Most workers would undoubtedly choose employer X.
If employer Y decides not to alter working conditions, it must pay wage above
Rs.100 to be competitive in the labor market.
ї The extra wage it must pay to attract workers is called a '%#$
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undesirable working conditions.
їAfter the wage rise of firm Y, if both firms could obtain the quantity and quality of
works they wanted, the wage differential would be an equilibrium differential, in the
sense that there be no forces causing the di fferential to change
5. | The Compensating Wage Diffrential serves a social need by giving people an
incentive to voluntarily do dirty, dangerous, or unpleasant work or a financial
penalty on employers offering unfavorable working conditions.
6. | At an individual level, it serves as a reward to workers who accept unpleasant jobs by
paying them more than comparable workers in more pleasant jobs. Those who opt
for more pleasant conditions have to buy them by accepting lower pay.

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Any Wage Structure basically has two kinds of charecteristics $)  

* & $
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 implies that wages & salary of two regions, firms, industries & occupation are
equal, while they differ in case of $ 
 
  * Wage Diffrentials that build up the
Wage Structure are of various kinds. A research team of Johri & Agarwal has found the
following findings:-

1. | In a Plant or an Organization the Wage rate differ from individual to ind vidual. Even for
the same Job the Wages can differ in the same industry & the same region. Thus, Wage
Rates vary from Plant to Plant , Department to Department & Industry to Industry.
2. | The General Wage Level can also vary from regions to region in a particular industry.
3. | In an organization there can be several Occupational Designations and the wage rate
between the highest & Lowest Paid can be quite wide.
4. | Researchers are of the view that the inter-industry wage structure is rather flexible
rather than rigid. The flexibility in the inter ʹindustry wage diffrentials may be due to the
high Productivity Industries charecterised by high degree of skill & Capital Intensity
required.
5. | Researchers are of the view that Presence of the Trade Union have led to the rise in the
wages on Productivity or Performance Wages which resulted into the rise in the Wage
Diffrential.
6. | Researchers view that the earnings due the variations in the skills have been greatly
reduced by additions of the dearness allowances & other Fringe Bene fits availiable to
the employees. So the Salary that an Skilled individual takes home may not differfrom
another who is not skilled within or outside the industry.
7. | But still the annual total earnings of an worker at one level may differ from others in the
same level in some other industries.



c c
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 %  
 ,! The Trade Unions have always been responsible for the
designing of the wage structure which depends on the Trade Union Strengths which
depends on the Number of Mandays lost as aresult of Strikes & Lockouts. Trade
Unions that exist in a particular industry may pressurise the managements of various
 plants or organizations within the industry making the wage pay of one industry
differ from other.
-| , 
 % .%  / 
  %! The share of wages in the value addition has
been falling over the years. The value that has been added is increasing
tremendously but the wages & earnings have not been increasing correspondingly.
Earlier Labour was a major factor in the production but the technological progress
has dominated the scene. Even then the share of wages have not increased & fallen
below the coresponding level of workers. 
 !
 
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1|  $  c
 ! Thers has been increase in the use of capital these days in the
industrial sector which has resulted in the value addition of these industries. Capital
Intensive Techniques are bieng used by the Industry after the liberalisation of the
imports by the GOI under new economic policy. Those firms who could not use the
capital intensive technique were forced to shut down due to the heavy competeion
from the capital intensive firms. Capital Intensity improves productivity thereby
improving the wage Paiying Capacity of the Industry.
  $ c
 !
 $ 0
   
2| '
 %   ! Price-Cost Margin is yet another source inter-industry wage
diffrentials. The Variable is the value added per unit of input used in different
industries over the period under consideration. 
3| c  
4
% ! The Initial Level Earnings will enable the workers to predict
the future earnings and is the source of inter industry wage diffrentials. It refres to
the per man day earnings in1973 -74.
5| 6 %( ,! The Production workers are usally unskilled Labourers who are
supervised by the skilled Workers i.e the non-productive workers. As the total non-
Productive Workers increases there is said to be skilled growth. 
7| %' 4 ! The final source of inter industry wage diffrentials is the productivity
which means the labour Productivity & is the major source of Wage diffrentials.