ECON 201 Lecture Notes - Lecture 25: Efficiency Wage, Competitive Equilibrium, Human Capital
1
ECON 201 – Lecture 25 – Chapters 19-20
*All charts and graphs based off or replicated by Joel Han in class unless stated otherwise
Gender Pay Gap
oWomen earn “77 cents” on the dollar compared to men
What are some likely reasons for this difference?
Discrimination in wages
Education levels
Different jobs
What if we looked at men and women within the same occupation?
For occupations in class, total average gender gap was 23.28% as
of 2014
Adjusted wage gap
oAfter adjusting for occupation, gender wage gap is still around the same
What if we also adjust for:
Industry
Part time work
Leaving work force temporarily
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2
oWomen earn around 93-96 cents for every dollar men
make
Gap is small put still present
Explaining differences in wages
oIn Competitive equilibrium, wages are equal to VMPL
Productivity differences could give different wages
oWages might not be determined in equilibrium
Minimum wage laws
Union negotations
Efficiency wages (pay workers so they continue to put in effort,
complicated model)
Differences in productivity
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3
oPeople have different ability levels
Natural talent; some people have more production than others
oHuman capital: productivity can be increased
Training; education
oHealth: illness/injuries may reduce productivity
Element of chance
“Superstar” industries
oIn some industries, the highest ability individuals can satisfy the whole market
Music, film, sports
Marginal cost of increasing quality is high, marginal cost of increasing
quantity is low
oVMPL is very high for high ability individuals
Skill biased technological change
(TABLE:) Percentage difference in annual earning college graduates Vs. High School graduates
1974 2014
Men 42% 81%
Women 35% 71%
oVMPLC - VMPLH
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find more resources at oneclass.com
Document Summary
Econ 201 lecture 25 chapters 19-20. *all charts and graphs based off or replicated by joel han in class unless stated otherwise. Gender pay gap: women earn 77 cents on the dollar compared to men. For occupations in class, total average gender gap was 23. 28% as of 2014. Adjusted wage gap: after adjusting for occupation, gender wage gap is still around the same. 2: women earn around 93-96 cents for every dollar men make. Explaining differences in wages: in competitive equilibrium, wages are equal to vmpl. Productivity differences could give different wages: wages might not be determined in equilibrium. Efficiency wages (pay workers so they continue to put in effort, complicated model) Natural talent; some people have more production than others: human capital: productivity can be increased. Training; education: health: illness/injuries may reduce productivity. Superstar industries: in some industries, the highest ability individuals can satisfy the whole market.
