Evaluation of The Factors Affecting on the Wage Inequality in Iran’s Industry Sector

One of the factors affecting the dynamics of the economy is to pay wages proportional to productivity. If wage inequality is caused by factors other than productivity, there will be losses imposed on the economy.This study focuses on utilizing the data of micro-level Households’ Income and Expenditure surveys of  the statistical center of Iran over 2005-2014. It also uses the  Oaxaca-Blinder (1973) and Machado-Mata (2005) decomposition model to analyze wage inequality and contribution of discrimination and productivity difference in the industrial sector’s wage gap. The evidences show that wage inequality has decreased but the share of wage discrimination has increased, while the share of productivity difference has decreased. The results suggest that firms economic rent has played a dominant role in determining wages and productivity has had no much role in determining wage.In fact, reducing the role of human capital in determining wage inequality has occurred for the three following reasons:   there is a decrease in the quality of human capital, there is no  adequate relationship between education and production activities in the industry sector,and there is no effective relationship between  universities and the industry sector.