chap19 - Earnings and Discrimination Earnings and...

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1 Earnings and Discrimination Chapter 19 Earnings and Discrimination s Differences in Earnings in the United States Today b The typical physician earns about $200,000 a year. b The typical police officer earns about $50,000 a year. b The typical farm worker earns about $20,000 a year. Earnings and Discrimination s What causes earnings to vary so much? b Wages are governed by labor supply and labor demand. b Labor demand reflects the marginal productivity of labor. b 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 WAGES s Compensating differentials s Human capital s Ability, effort, and chance s Signaling s The superstar phenomenon Compensating Differentials s Compensating differential refers to a difference in wages that arises from nonmonetary characteristics of different jobs. b Coal miners are paid more than others with similar levels of education. b Night shift workers are paid more than day shift workers. b Professors are paid less than lawyers and doctors. Human Capital s Human capital is the accumulation of investments in people, such as education and on-the-job training. s The most important type of human capital is education.
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2 Human Capital s Education represents an expenditure of resources at one point in time to raise productivity in the future. s
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chap19 - Earnings and Discrimination Earnings and...

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