ECON 10a Chapter Notes - Chapter 19: Efficiency Wage, Signalling Theory, Human Capital
12 Dec 2016
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To some extent, wage differentials compensate workers for job attributes. Other things being equal, workers in hard, unpleasant jobs are paid more than workers in easy, pleasant jobs: human capital is the accumulation of investments in people, such as education and on. The job training: workers with more human capital are paid more than workers with less human capital. Three reasons for above equilibrium wages are minimum wage laws, unions, and efficiency wages. Measuring the amount of discrimination is difficult, however, because one must correct for differences in human capital and job characteristics: competitive markets tend to limit the impact of discrimination on wages. If the wages of a group of workers are lower than those of another group for reasons not related to marginal productivity, then nondiscriminatory firms will be more profitable than discriminatory firms. Profit maximizing behavior, therefore, can reduce discriminatory wage differentials.
