Chapter 73, Problem 1FRQ

Solution

a)

The reason for wage differences among the same workers in the case of test pilots for new jet aircraft who earn higher wages than airline pilots.

Introduction: When there is a difference in wages of workers due to skills, experience, and the nature of the work then it is a wage differential or wage difference among workers.

Due to the reason for compensating differentials, there is a wage difference in the case of test pilots where test pilots for new jet aircraft earn higher wages than airline pilots. It happens because the job of a test pilot is riskier as compared to the job of an airline pilot. The nature of work can be responsible for the change in the wage of workers for the same category of job.

b)

The reason for wage differences among college graduates who usually have higher earnings in their first year on the job than workers without college degrees in their first year on the job.

Introduction: When there is a difference in wages of workers due to skills, experience, and the nature of the work, then it is a wage differential or wage difference among workers.

The reason for wage differences among college graduates who usually have higher earnings in their first year on the job as compared to the workers who do not have any college degree is the difference in human capital. It means that educated workers or workers who have a college degree have better skills, knowledge, and understanding of the job as they may work on different projects during their college. And, education also leads to higher productivity, therefore, graduated workers may have a higher wage than workers without a degree.

c)

The reason for wage differences among the same workers in the case of experienced AP teachers who command higher salaries than new AP teachers for teaching the same class.

Introduction: When there is a difference in wages of workers due to skills, experience, and the nature of the work then it is a wage differential or wage difference among workers.

Due to the reason of differences in human capital, there is a wage difference among experienced AP teachers who command higher salaries than new AP teachers for teaching the same class because the experienced teachers brought their past experience of teaching which can be valuable for students. And, experienced teachers can also be able to increase the marginal product of teaching, therefore, there is a wage difference between experienced and new teachers even if they are teaching the same class.