EC120 Chapter Notes - Chapter 19: Making Money, Market Power, Brown Hair
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EC120 Full Course Notes
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Jobs have many differing characteristics both in terms of the wage they pay and in terms of their nonmonetary attributes. When a worker is deciding to take a job, the wage is only one of many job attributes that the worker takes into account. The better the job is gauged by these nonmonetary characteristics, the more people there are who are willing to do the job at any given wage. To induce people to take the crappier" jobs they have to give them a higher wage. Compensating differential-a difference in wages that arises to offset the nonmonetary characteristics of different jobs. Human capital-the accumulation of investments in people, such as education and on-the-job training. An investment in education is tied to a specific person, and this linkage is what makes it human capital. The difference in wages between highly educated workers and less educated workers may be considered a compensating differential for the cost of becoming educated.
