The causes of wage differentials can be classified into two categories:
(a) Wage differentials between different occupations.
(a) Difference in demand for goods: Demand for labour depends upon the demand for goods in the production of which they are employed. Demand for different commodities is not same. Difference in demand for different goods is an important factor that causes wage differentials.
(b) Expenses on training: Larger the expenses on training, more is the wage and vice versa.
(c) Supplementary income: Workers are ready to work at low wages in certain occupations where they can supplement their incomes compared to workers working in those occupations where there are fewer chances for them to supplement their incomes.
(d) Risk of life: In certain occupations, a great risk of life is involved. Therefore in such occupations, money wages are higher than the wages in less risky occupations.
(e) Social status: The greater the respect a person enjoys the lower the wages at which he would be ready to work. So wages tend to vary from occupation to occupation.
(f) Future prospects: Future prospects also vary from occupation to occupation. People are always ready to join occupations, where their future is bright at low wages.
(b) Wage differentials within the same occupation.
(a) Differences in efficiency of labour: All labourers are not alike. They differ in their efficiency. More efficient workers get better wages as compared to less efficient workers.
(b) Geographical mobility: Wages differ within the same occupation at different places. A worker earns much more in Delhi than at Kohima.
