Page 410 - The Principle of Economics

418 PART SIX
THE ECONOMICS OF LABOR MARKETS
This theory of the labor market, though widely accepted by economists, is only the beginning of the story. To understand the wide variation in earnings that we observe, we must go beyond this general framework and examine more pre- cisely what determines the supply and demand for different types of labor. That is our goal in this chapter.
SOME DETERMINANTS OF EQUILIBRIUM WAGES
Workers differ from one another in many ways. Jobs also have differing character- istics—both in terms of the wage they pay and in terms of their nonmonetary at- tributes. In this section we consider how the characteristics of workers and jobs affect labor supply, labor demand, and equilibrium wages.
COMPENSATING DIFFERENTIALS
When a worker is deciding whether to take a job, the wage is only one of many job attributes that the worker takes into account. Some jobs are easy, fun, and safe; oth- ers are hard, dull, and dangerous. The better the job as gauged by these nonmon- etary characteristics, the more people there are who are willing to do the job at any
“On the one hand, I know I could make more money if I left public service for the private sector, but, on the other hand, I couldn’t chop off heads.”