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What do you understand by wage variations?
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The wage-rates depend on various social, political, ethical, behavioural and economic factors. Hence, there are differences in wage rates. The relative difference in wage levels is called wage varieties.
There are three types of variations in wage rates.
(1) Time Variations—Wage rates differ from time to time according to economic conditions of the country. In slump period, the wage rates are lower whereas the inflationary pressures may hike in wage rates.
(2) Regional Variations—There are different wage rates in difficult regions for the same work in the same industry. This may be because of several reasons such as economic development of the region, demand and supply of the workers, cost of living index and standard of living etc.
(3) Industrial Variations—Wage rates may differ from industry to industry. One industry may pay more its workers in the same region for similar work. Various factors such as demand and supply of skilled labour, nature of work and working conditions in the industry, place of industry in the national economy etc., influence the wage rates.
Factors Affecting Wage Rates
(1) Demand and Supply of Workers—The demand and supply of workers in the labour market affects wage rates. If the labour is in short-supply, the workers shall be paid well. If the labour is available in plenty, wages rates will be lower.
(2) Bargaining Power-Wage rates also depend to a large extent on the relative bargaining power of the trade unions or workers and employers. Where labour unions are strong enough to force the hand of employers, the wages will be determined at a higher level in comparison to other units where unions are weak.
(3) Cost of living-Progressive employers do not leave the wages to be determined by the blind forces of demand and supply. They take due notice of the cost of living for the workers at that place and try to fix the wages as to ensure a decent living wage to the workers. Cost of living varies under inflationary and deflationary pressures, where employers do not show enough awareness, labour unions, if strong, come out with a demand of wage adjustment according to the cost of living index number.
(4) Condition of product Market—The wage levels will be influenced by the degree of competitions prevailing in the market for the product of the industry. If it is a perfect competitive market the wage level may be at par with the value of the net additions made by the workers to the total output. But in any given industry or occupation, wages may not reach this level if imperfect competition exists in the product market.
(5) Comparative wages-Wages paid by other firms in the same market for similar work also influence the wage levels. Wage rates must also be in consistent with the wages paid by other firms in the same industry. The comparative wages will increase the job satisfaction among the workers.
(6) Ability to pay-Wage rates are influenced by the ability of industry or firm to pay its workers. Those firms which are earning huge profits may naturally afford much belter wage rates and more facilities to its workers in comparison to those firms which are earning only marginal profits.
(7) Productivity of labour—Productivity is considered to be the main basis of wage-determination. In firms, where productivity of labour is high, higher wages are paid as compared to other jobs which do not require the same degree of skill, responsibility or risk.
(8) Job requirements—A worker is compensated according to the job requirements. If a job requires higher skill, greater responsibility and risk, the worker placed on that job will naturally get higher wages in comparison to other jobs which do not require the same degree of skill, responsibility or risk.
(9) Government policy—Since the bargaining power of the workers is not enough to ensure fair wages in all industries, the Government has to interfere in regulating wage rates to guarantee minimum wage rates in order to cover the essentials of a decent living.
(10) Goodwill of the company—A few employers want to establish themselves as good employer in the society and fix higher wages for their workers. It attracts qualified employees.
