Exam 19: Earnings and Discrimination

One hypothesis to explain the changing gap in wages between unskilled and skilled workers in the United States is that international trade has altered the relative demands for skilled and unskilled workers.

Construction work is much riskier than working as a server at a restaurant. As a result, we'd expect a difference in wages between the two jobs. The difference is known as

Explain why the following situation is likely to persist: soccer players in Europe are the highest paid athletes and in the US they are among the lowest paid athletes.

Workers in a labor union typically are paid less than workers not in a labor union.

Economists typically explain occupational differences between men and women through preferences, ability, and discrimination. What additional factor did economists Muriel Niederle and Lise Vesterlund add to this list?

Suppose that Russell is the best contractor in town, and he makes $475,000 a year. Suppose that Aneesha is the best and highest paid actress in Hollywood, and she makes $14 million per movie. Both are the best in their respective fields of work. One reason for the significant difference in incomes has to do with the nature of the service each offers. Russell's contracting services

The National Collegiate Athletic Association (NCAA) has long argued that nationally-prominent college athletes are compensated with an investment in human capital that far exceeds the monetary reward of playing professional sports. Examine this argument in light of your knowledge of human capital theory and the economic theory of labor markets.

In the country of Freedonia, men and women have the same level of education and choose different forms of work in the same proportions. The only real difference is that men typically stay home to raise young children, returning to the work force after their children enter elementary school. If no discrimination exists, then we would expect that, on average,

Scenario 19-3 In the small town of Houghton, Michigan, there is a local hardware store called Eddy's Hardware. There are only two types of workers who apply for jobs at Eddy's Hardware: cowboys and farm boys. Local politicians have received numerous complaints that Eddy's Hardware is practicing wage discrimination against farm boys. Eddy's Hardware denies the complaint and says the store is only trying to maximize profit. -Refer to Scenario 19-3. Which of the following statements would weaken the discrimination complaint against Eddy's Hardware?

Human capital refers to the physical tools and equipment that workers use on their jobs to enhance their productivity.

Alexis and Matthew are twins who attended elementary school through college together. Both twins got jobs in the same department of a marketing firm. They both work equally hard and have received similar performance reviews. Alexis earns $57,000 a year, and Matthew earns $72,000 a year. Select the best explanation for this wage difference.

John has financial assets totaling $1.5 million, and he plans to use these assets to start his own business. Since John owns these funds and will not need to borrow to start his business, these assets are considered human capital.

When discrimination occurs as a result of employer prejudice, discriminating firms do not maximize profits.

Scenario 19-4 Assume that the labor market for barbers is competitive and that it is differentiated into two groups: barbers who are bald (or going bald) and those who have a full head of hair. Assume that the barbers in this market have identical hair-cutting ability, regardless of whether they are bald or not. Currently, the equilibrium wage in the bald barber market is lower than that in the nonbald market. Further assume that the market for haircuts is competitive. -Refer to Scenario 19-4. If some consumers in the market for haircuts have a strong preference for having their hair cut by a barber who is not going bald, then

Empirical work that does not account for differences in the productivity of workers

Other things the same, we'd expect that a job with less pleasant working conditions pays

Suppose that a company hires recent college graduates for two types of jobs, sales people and credit analysts. The hours worked and skill levels are the same for both positions. The sales people get to travel to several desirable locations, whereas the credit analysts do not leave the home office. When comparing the salaries of the two positions, it is likely that the company pays the

Which of the following is considered human capital?

Some economists hypothesize that international trade has altered the relative demand for skilled and unskilled labors, changing the gap in earnings between these two groups. Which of the following statements best describes this hypothesis?

The difference in wages that results from nonmonetary characteristics of different jobs is called the