Earnings Differences, Labor Market Discrimination and Predictions

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ECON EXAM
To what extent are earnings differentials between workers, otherwise comparable in their human capital characteristics, attributable to this factor (provide examples): A) "unpleasant (disagreeable, hazardous) or pleasant jobs or working conditions, i.e., compensating wage differentials?"

Unpleasant (disagreeable, hazardous) jobs and working conditions tend to involve more risks for the workers. There is a trade-off between the wages and the risk when considering an indifference curve with the wage and risk of injury. Employers provide higher wages as an incentive in risky jobs compared to safer jobs. For instance, handling chemicals involves risk, and highly trained workers are willing to pay high. When two jobs are paying the same, but one has safe working conditions, potential employees will prefer this job over the risky one.

B) ONE of their personal characteristics -- either their age, gender, race/ethnicity, or appearance -- for which employers might tend to engage in at least one particular type of labor market discrimination (e.g., pure, statistical, and occupational crowding)?

In labor market discrimination, workers or groups of workers are treated differently because of personal characteristics that are non-economic. The interaction between labor supply and demand is merely one factor in wage and employment determination and not the main factor. One form of statistical discrimination in recruiting and promoting staff of employees where there is a reference for men assuming they are more likely to be committed in the workplace. Wages, which are the labor market prices, are determined by factors directly linked to the market forces of supply and demand. Discrimination implies wage differentials, even when the productivity of men and women is the same, and if the employer discriminates against women, there is a wage gap in favor of men. Employers may also discriminate against labor because of their discrimination preferences, and the determination of wages results in wage differences. C) Being a labor union member -- either a craft, industrial vs. professional type of union?

Being a labor union member such as the auto workers is associated with higher pay than the non-unionized autoworkers. There is collective bargaining, and the employers tend to pay for more benefits such as health benefits. Labor unions lobby higher wages than the set minimum wages. The unions utilize the strike threat power to influence the minimum wage where the wage rate is at a higher MRP level where the unions influence higher pay at higher employment levels.

D) Employers' use of "efficiency wage" pay strategies, intended to promote a future increase in marginal revenue product (MRP) or decrease in average cost of labor?

Efficiency wages are higher than the market equilibrium, and employers pay efficiency wages as a way to attract productive employees and avoid shirking. Lowering their wages would allow the employers to hire more workers but choose not to do so. The efficiency wage pay strategies increase the MLC where the employees earn higher wages, and as the curve is downward sloping at higher "efficiency wage" pay strategies, this will reduce the a...