ch 20 - earnings & discrimination

ECON 1101

compensating differentials

difference in wages that arise to offset nonmonetary characteristics of different jobs (unpleasantness, difficulty, safety)

• e.g., workers on night shifts are paid more than similar workers on day shifts

human capital

accumulation of investments in people

the knowledge and skills that workers acquire through education, training, + experience

• e.g., education, on-the-job training

skill-biased technological change

• raise the demand for skilled who can use new machines

• reduce the demand for the

signaling (theory of education)

workers signal their innate productivity to employers by their willingness to spend years at school

• education is correlated with ability, “schooling has no real productivity benefit”

superstar phenomenom

superstars arise in markets where:

• every customer in the market wants to enjoy the services supplied by the best producers

• the services are produced with a technology that makes it possible for the best producers to supply every customer at low cost

monopsony

a market that has only one buyer

non-compete clauses

• bars employees from leaving to work for a competitor

• protect employers’ trade secrets

• curb competition in the labor market, keeping wages below their equilibrium level

union

worker association that bargains with employers over wages and working conditions

efficiency wages

above-equilibrium wages paid by firms to increase worker productivity

discrimination

offering of different opportunities to similar individuals who differ only by race, ethnicity, gender, age, religion, sexual orientation, or other personal characteristics

occupational segregation

based on the assumption that some men prefer not to work with women or take orders from women

statistical discrimination

discrimination that arises because an irrelevant but observable personal characteristic is correlated with a relevant but unobservable attribute