EMPIRICAL ANALYSIS OF WAGE DIFFERENTIALS AMONG PUBLIC SERVANTS

EMPIRICAL ANALYSIS OF WAGE DIFFERENTIALS AMONG PUBLIC SERVANTS IN NIGERIA

CHAPTER ONE

INTRODUCTION

1.1 BACKGROUND OF THE STUDY

One of the most intriguing issues in labour economics has been the pattern of inter-industry wage differentials. Economists have found a remarkable regularity in wage dispersion within and between countries, even after wages have been controlled for differences in human capital, occupation, and other variables. These findings suggest that wage differentials are compatible with the functioning of capitalist economies, and thus cast doubt on the appropriateness of competitive theories. Besides competitive arguments, segmentation arising from efficiency wage models has occupied a central role in the explanation of wage differentials in developed countries, (Garino & Martin, 2007). The level of wage earning varies due to diversities of human capital, individual innate abilities, job nature and conditions, nonwage benefits from employers, location, etc. Unexplained wage gaps occur when two people with equal abilities and skills are doing similar jobs but are treated differently by the employer. Although this difference in treatment may take many forms (wages, job assignments, promotions, or any other type of retribution), in this study we deal exclusively with wage gaps. These wage gaps in the labour market have various consequences.

The investigation of wage determination and wage differentials in developing countries has concentrated on the effects of human capital and different sources of segmentation associated with institutional arrangements and structural characteristics on earnings. The level of wage disparity in Nigeria started as far back as 1951, the introduction of federal principle in administration of the country by the Macpherson constitution, regional governments and their employee dealt with wage issues with wage review commissions, and wage level differs from region to region reflecting the budgetary disparities among the various governments, (Otobo (1992), in Emmanuel, 2002).

Wage differential in Nigeria basically is determined by the degree to which institution forces limit the influence of market forces generally. Workers in different states of the federation; federal, state, and local governments have variation in what they receive as salary and other fringe benefits. This is in line with 1997 federal government budget pronouncement by late Gen. Abacha that “each state should pay its workers according to its ability (resources)”

(Nick, 2001). Wage varies more from place to place than the price of provisions. That wage did not fluctuate in line with the cost of provision (cost of living), the current wages were enough to provide the subsistence at high prices also. Wages were higher in those areas where the provisions were cheaper such as in England as compare to the situation in Scotland (Adam Smith, 1776). This implies that wage increment does not depend solely on the prices of goods and services. Thus it is only true to a certain degree, because today union negotiation base in the variation of prices (inflation targeting).

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