426 PART SIX THE ECONOMICS OF LABOR MARKETS when analyzing earnings. Although most wage differences can be understood while maintaining the assumption of equilibrium in the labor market, above-equilibrium wages play a role in some cases. QUICK QUIZ: Define compensating differential and give an example. ± Give two reasons why more educated workers earn more than less educated workers. THE ECONOMICS OF DISCRIMINATION Another source of differences in wages is discrimination. Discrimination occurs when the marketplace offers different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics. Dis-crimination reflects some people’s prejudice against certain groups in society. Al-though discrimination is an emotionally charged topic that often generates heated debate, economists try to study the topic objectively in order to separate myth from reality. MEASURING LABOR-MARKET DISCRIMINATION
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