SummaryCh10 - S u m m ar y The wage (or earnings) structure...

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Summary • The wage (or earnings) structure can be cut along many dimensions besides workplace amenities and education that we explored in the previous chap- ters. In particular, we are often interested in how earnings vary by occupation, region, industry, and public versus private sector. The human capital earnings function is especially helpful in summariz- ing how earnings vary in these dimensions,because it allows us to isolate the “pure” impact of working in a specific region or job, controlling for all of the other factors, especially age and education (skill). • Simple supply and demand diagrams can be used to explain why wages differ across sectors. In equi- librium, we expect wage differentials to exist because of differing demand conditions, combined with differences in the supply of workers. That said, wage differentials may be exacerbated by impediments to mobility of workers between sec- tors, and nonequilibrium wage differences may persist, even in the long run, if workers cannot
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