2. Prepared By
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Manu Melwin Joy
Assistant Professor
Ilahia School of Management Studies
Kerala, India.
Phone – 9744551114
Mail – manu_melwinjoy@yahoo.com
3. 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.
4. 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.
5. Compensating Differentials
• Some jobs pay more
because they are less
desirable. They may be
hazardous, dirty, and
employment may be
sporadic or seasonal.
6. Compensating Differentials
• For instance, construction
pays more than retail sales
because of these
compensating differentials,
which are nonmonetary
differences between jobs
where higher or lower wages
are paid because of
differences in the desirability
of the job itself.
7. Compensating Differentials
• Most retail jobs take place in air-
conditioned or heated stores where the
worker can wear nice clothing, stay
clean, engage in friendly conversations
with customers, and expend little
physical effort. By contrast, construction
workers may perform hazardous work,
will become dirty during the job
requiring them to spend additional time
cleaning up afterwards, and will often
have to work long hours to get the job
finished, and they may not get work
during the winter months. Hence, to
attract enough workers to construction,
the industry has to pay more.
8. Compensating Differentials
• In many cases, status or
power, or the lack thereof,
may also be a compensating
differential. After all, you
never hear a kid saying I
want to grow up to be a
garbage collector.
9. Compensating Differentials
• On the other hand, much
more money is spent to
elect someone to the
presidency of the United
States than they will ever
earn at the job, and many
lawyers make more than
Supreme Court justices, yet
few lawyers would turn
down an appointment to the
Supreme Court.
