Some input price or wage differentials may be caused by disequilibrium conditions in industries. Thus while demand for some goods may by rising for goods of some industries leading to their expansion and increased employment, some others may be suffering from declining demand and virtual closure. Such disequilibrium may cause price and wage differentials. Thus coal miners or people with skills related to coal mining will naturally get lower rewards. On the other hand, information technology (IT) sector is among the fastest growing industries. Thus computer engineers and persons with specialized skills in computer hardware and software and other IT enabled services are in great demand thus creating a demand – supply imbalance in the work – force required by the information technology industry. Thus it is quite obverses that those having specialized skills and knowledge related to information technology will get higher rewards.
Such differentials can however be narrowed down if workers from the declining industries get adequate training and acquire skills required in the growing industries and then move on to these new jobs. Same would be the case when capital moves out of coal mining to IT sector where it would get a much higher return. Thus this process of relocation of resources can help to mitigate differential rewards to some extent.SUBMIT ASSIGNMENT NOW!