Quiz9Notes - Earnings and Discrimination 5:08:00 PM Each...

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Earnings and Discrimination 03/11/2007 16:08:00 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 Compensating differential:  a difference in wages that arises to offset the non- monetary characteristics of different jobs. Fun, easy safe jobs pay less than hard, dull,  dangerous jobs.  Human capital:  the accumulation of investments in people, such as education  and on-the-job training Union:  a worker association that bargains with employers over wages and  working conditions Strike:  the organized withdrawal of labor from a firm by a union Efficiency wages:  above-equilibrium wages paid by firms to increase worker  productivity  COMPENSATING DIFFERENTIALS  Fun, easy safe jobs pay less than hard, dull, dangerous jobs HUMAN CAPITAL Capital  is the economies sock of equipment and structures, a factor of  production that itself has been produced Human capital:  the most important is education. Those with highers human  capital earn more. In less developed countries, the difference in wages  between the educated and uneducated is greatest because educated workers  are scarce and demand is high.  Firms pay more for educated workers because they have a higher marginal  product The difference in wages may be considered a compensating differential for  the cost of becoming educated
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CASE STUDY: THE INCREASING VALUE OF SKILLS The rich are getting rich and the poor are getting poorer The earnings gap has increased significantly in the past 20 years Hypothesis #1: international trade has altered the relative demand for skilled  and unskilled labor. Because unskilled labor is plentiful and cheap in foreign  counties, the US typically imports goods produced with unskilled labor and  exports goods produced with skilled labor Hypothesis #2: changes in technology have altered the relative demand for  skilled and unskilled labor. Skilled laborers are needed to operate the  technology that does the work that unskilled laborer used to.  Both hypotheses may be true ABILITY, EFFORT, AND CHANCE Higher levels of ability, effort, and chance affect wage
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  • Fall '06
  • WISSINK
  • Economics, producer, Laborer, workers Women, onthejob training Union

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