The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Inequality of Pay

  • Henry Phelps Brown
Reference work entry


The difference between the hourly rates of pay for two jobs might be seen in the same way as that between the prices of a ton of copper and a ton of steel: there is a common unit of quantity, but the conditions of supply and demand for the two articles are largely independent, and the difference between their prices is only an arithmetic by-product. But people do attach significance to the differences between rates of pay, and their ideas about what these should be help to fix particular rates. The relations between the rates of pay for different jobs are termed differentials when the jobs compared lie at different grades within the same occupation or industry, and relativities when they are in different ones. Both sorts of comparison are possible because jobs are defined by their requirements – what physical and mental ability, length of training, experience, tolerance of adverse working conditions, and the like, they demand from anyone who is to do them adequately; and these requirements are regarded as being common to jobs of all kinds, but present in different amounts and proportions. The requirements of given jobs are assessed intuitively by those who make practical judgements about the fairness of differentials and relativities, and are set out explicitly in the procedure known as job evaluation. The rate for a job is regarded as made up of the shadow prices of the capacities to meet the several job requirements, together with the extent of each requirement in the given job.

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© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Henry Phelps Brown
    • 1
  1. 1.