Earnings and Discrimination Chapter 19
Earnings and Discrimination Chapter 19
Differences in earnings in the U.s. 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
Differences in Earnings in the U.S. 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
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
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
Some determinants of equilibrium Wages o Compensating differentials ● Human capital Ability, effort, and chance °5 ignaling The superstar phenomenon
Some Determinants of Equilibrium Wages • Compensating differentials • Human capital • Ability, effort, and chance • Signaling • The superstar phenomenon
Compensating Differentials Compensating differentials refer to differences in wages that arises from nonmonetary characteristics of different ObS o Coal miners are paid more than others with similar levels of education Night shift workers are paid more than day shift workers o Professors are paid less than lawyers and doctors
Compensating Differentials • Compensating differentials refer to differences in wages that arises from nonmonetary characteristics of different jobs. • Coal miners are paid more than others with similar levels of education. • Night shift workers are paid more than day shift workers. • Professors are paid less than lawyers and doctors