EC120 Lecture Notes - Lecture 19: Profit Motive, Physical Therapy, Justin Timberlake
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EC120 Full Course Notes
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These variations are explained by labour and supply demand. Labour demand reflects the marginal productivity of labour. In equilibrium, the wages workers earn equal the value of their marginal contribution to the economy"s production. There are many factors that affect productivity and wages: compensating differentials. Compensating differential: a difference in wages that arises to offset the non-monetary characteristics of different jobs. These characteristics can include: unpleasantness, difficulty, safety, examples: Coal miners and fire fighters are paid more than other workers with similar education to compensate them for the extra risks. Night shift workers are paid more than day shift to compensate for the lifestyle disruption working at night: human capital. Human capital: the accumulation of investments in people, such as education and on-the-job training. Human capital affects productivity, thus labour demand and wages. On average, people with more human capital earn more than those with less human capital.
