If some occupations command higher wages, labour will be encouraged to move into these occupations from lower-paid ones. Thus in a perfect labour market with no barriers to mobility and no differences in productivities, wage rates across occupations will eventually converge. Clearly this is not the case in practice; large differentials in wages exist between occupations. How can this happen? In neo-classical economics the explanation for wage differentials lies in differences between marginal productivities of workers. The focus therefore is on the characteristics of individual participants in the labour markets.