ECON 1116 Lecture Notes - Lecture 21: Market Power, Human Capital, Efficiency Wage
18 Apr 2016
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Document Summary
Compensating differential: a difference in wages that arises to offset the nonmonetary characteristics of different jobs. Coal miners and fire fighters are paid more than other workers with similar education to compensate them for the extra risks. Night shift workers paid more than day shift to compensate for the lifestyle disruption of working at night. Greater ability or effort often command higher pay. These traits increase workers" marginal products, make them more valuable to the firm. Ability, effort, and chance are difficult to measure, so it is hard to quantify their effects on wages. They are probably important, though, since easily measurable characteristics (education, age, etc. ) account for less than half of the variation in wages in our economy. Rising exports of goods made with skilled labor, rising imports of goods made with unskilled labor. New technologies have increased demand for skilled workers, reduced demand for unskilled workers.
