Wage Structure in Consumer Goods and Capital Goods Industries in India

An attempt has been made in this paper to examine the wage structure in consumer goods industries in relation to that in capital goods industries in the light of the two major hypotheses, viz., ‘the expected ability to pay hypothesis’ and ‘the technology hypothesis’ which constitute the basic theoretical framework for explaining the inter-industry wage differentials in the manufacturing sector. The analysis is based on the cross-section data relating to the industries classified at the three-digit level of aggregation available from ASI 1975-76. The main findings of the study are: (a) There are significant differences in the inter-industry wage structure between the capital goods industries and the consumer goods industries in Indian manufacturing sector. On an average, wage rate in the consumer goods industries is lower than the wage rate in the capital goods industries and the former shows a much greater degree of absolute as well as relative wage differentials as compared to the latter; and (b) The inter-industry wage structure in capital goods industries is explained primarily by the corresponding inter-industry differences in the expected ability to pay, whereas the inter-industry wage structure in consumer goods industries is influenced also by the existing inter-industry differences in technological levels.