Lecture 16 Notes - Econ 101 Introduction to Microeconomics...

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  Econ 101 Introduction to Microeconomics Professor Richard V. Burkhauser 19 19 Earnings and Discrimination
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Econ 101 – Professor Burkhauser Key Concepts compensating differentials, p. 414 human capital, p. 418 efficiency wages, p. 422 discrimination, p. 422
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Econ 101 – Professor Burkhauser Differences Differences in Earnings in the United States Today The typical physician earns about $200,000 a year. The typical police officer earns about $50,000 a year. The typical farm worker earns about $20,000 a year.
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Econ 101 – Professor Burkhauser Differences 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.
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Econ 101 – Professor Burkhauser Human Capital Theory Wages = Innate Ability + r (Education) Ted Schultz and Gary Becker won Nobel Prizes based on this conceptualization
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Wage Differentials due to Differences in Returns to Human Capital r H Unskilled Labor Market Skilled Labor Market L S L U w S w U D U D S S U S S
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Table 1: Average Annual Earnings by Educational Attainment
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Table 2: Median Annual Earnings by Race and Sex
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