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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 – [email protected]
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.