ECO102H1 Chapter Notes - Chapter 19: Efficiency Wage, Human Capital, Signalling Theory
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ECO102H1 Full Course Notes
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The supply of labour for easy, fun, and safe jobs is greater than the supply of labour for hard, dull, and dangerous jobs. As a result, good jobs will tend to have lower equilibrium wages than bad jobs. Economists use the term compensating differential to refer to a difference in wages that arise from nonmonetary characteristics of different jobs. Human capital is the accumulation of investments in people. The most important type of human capital is education. According to this alternative view, when people earn a college or university degree, for instance, they do not become more productive, but they do signal their high ability to prospective employers. The benefits to education are probably a combination of the productivity-enhancing effects of human capital and the productivity-revealing effects of signaling. Above-equilibrium wages: minimum-wage laws, unions, and efficiency wages. One reason for above-equilibrium wages is minimum-wage laws.
