Economics 10a Chapter Notes - Chapter 19: Efficiency Wage, Profit Motive, Human Capital
26 Jun 2018
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Earnings and Discrimination (summary pg. 412)
Chapter 19
● Earnings and Discrimination
○ what causes earnings to vary so much?
■ wages are governed by labor supply and labor demand
■ labor demand reflects the marginal productivity of labor
■ in equilibrium, each worker is paid the value of his or her marginal
contribution to the economy’s production of goods and services
● Some determinants of equilibrium of equilibrium wages
○ compensating differentials: a difference in wages that arises to offset the
nonmonetary characteristics of different jobs
■ coal miners are paid more than others with similar levels of ed.
■ night shifts are higher paid that day shifts
■ professors are paid less than lawyers and doctors
○ human capital: the accumulation of investments in people, such as education
and on-the-job training
■ most important is education
○ ability, effort, and chance
■ international trade and changes in tech has altered the relative demand
for skilled and unskilled labor
■ natural ability is important for workers in all occupations
■ many personal characteristics determine how productive workers are and,
therefore, determine the wages they earn
○ signaling
Document Summary
Wages are governed by labor supply and labor demand. Labor demand reflects the marginal productivity of labor. In equilibrium, each worker is paid the value of his or her marginal contribution to the economy"s production of goods and services. Some determinants of equilibrium of equilibrium wages. Compensating differentials: a difference in wages that arises to offset the nonmonetary characteristics of different jobs. Coal miners are paid more than others with similar levels of ed. Night shifts are higher paid that day shifts. Professors are paid less than lawyers and doctors. Human capital: the accumulation of investments in people, such as education and on-the-job training. International trade and changes in tech has altered the relative demand for skilled and unskilled labor. Natural ability is important for workers in all occupations. Many personal characteristics determine how productive workers are and, therefore, determine the wages they earn. Firms use educational attainment as a way of sorting between high and low ability workers.
