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CH 19 Earnings and Discrimination Workers earn different wages for many different reasons. The difference in wages compensate workers for job attributes. If other things are equal, workers in hard and unpleasant jobs get paid more than the workers in easy, pleasant jobs. It is just obvious that coal mining is a lot harder than working at Burger King, and thus coal minors are paid more.

Workers with more human capital get paid more than workers with less human capital.

Although years of education, experience, and job characteristics affect earnings as theory predicts, there is much variation in earnings that cannot be explained with economic measure. Basically, there are no definite measure of how much a worker gets paid. Like this ruler, there are no way to measure how a person will get paid.

Some economists said that education is not something that raises productivity, but rather a sign of natural ability. If this is correct, then increasing the educational attainment of all workers would not raise the overall level of wages.

Wages are sometimes pushed above the level that brings supply and demand into balance. this is due to three reasons: minimum-wage laws, unions, and efficiency wages.

Some difference in earnings are due to discrimination on the race, sex, or other factors. Measuring the amount of discrimination is difficult because one must correct for differences in human capital and job characteristics.

Competitive markets tend to limit the impact of discrimination on wages. If wages are different for reasons not related to marginal productivity, ten nondiscriminatory firms will be more profitable than discriminatory firms. Because firms want to maximize their profit, they reduce discriminations on wages. If customers are willing to pay more to discriminatory firms or if government passes laws requiring firms to discriminate, then discrimination persists.

Ch 19 key terms: compensating differential: a difference in wages that arises to offset the non monetary characteristics of different 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. discrimination: the offering of different opportunities to similar individuals who differ only by race, ethnic group, sex, age, or other personal characteristics.

Sources: http://www.mopo.ca/hello/1907759/640/larry-burger-king-2006.10.14-11.16.57.jpg

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