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Factors to account for differences in wages between industires

On the criterion of fairness, one would argue that two employees doing comparable work should draw comparable wages. Unions, too, would want comparable wages as they must protect the interests of all members. However, there are situations within the same national union when members earn different wages.

Consider the following scenario: Industry A and Industry B employees are extensively organized by conscientious and honestly run labor unions. Still, since 1972, the wages in Industry A have risen at about three times the rate of those in Industry B. Based on the scenario and your understanding of determinants of wages, respond to the following:

• What may account for the difference in the wages between these two industries? Identify and describe each factor and explain its effect on wages. If you make any assumptions about the scenario, state them.

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Solution Preview

There are a number of factors which could account for differences in wages even for identical work in two different industries.

1. Wages and the changes over time will be influenced by supply and demand. That is, the supply of trained individuals and the demand for them by companies. For example, highly technical positions may categorically command higher salaries simply because there is a limited supply of qualified workers. On the other hand, companies may not be ...

Solution Summary

The 309 word solution offers five possible reasons why wages may be different between industries together with examples.