Lecture PowerPoint® SlidesLecture PowerPoint® Slidesto accompanyto accompanyPrepared byMarc Prud‘Homme, University of Otta...
Chapter 19Chapter 19Earnings and DiscriminationEarnings and Discrimination2Copyright © 2011 Nelson Education Limited
Human Capital Human capital: the accumulation ofinvestments in people Ex. education, on-the-job training On average, pe...
A C T I V E L E A R N I N G 1:Discussion questionSuppose you were offered this choice:A. You could spend 4 years studying ...
Earnings of University Graduates vs.High-School Graduates5Copyright © 2011 Nelson Education Limited
Compensating Differentials Compensating differential: a different wage dueto non-monetary aspects of a job Other things ...
Case Study: Good Looks Pay People deemed more attractive than averageearn 5% more than people of average looks; andthe av...
The Superstar Phenomenon The best singer vs. the best plumber: which oneearns more? One can supply every customer at a l...
In each case, identify which worker would earn more andexplain why.A. The best physical therapist on the planet orthe best...
A. The best physical therapist on the planet orthe best writer on the planetThe superstar phenomenon:The best writer can s...
C. A graduate of a top college or an equally intelligent &capable graduate from lower ranked university.The signaling theo...
The Economics of Discrimination Discrimination: offering differentopportunities/rewards to similar individuals not onthe ...
Ratio of Female-to-Male Wages byOccupation, 1997 and 200613Copyright © 2011 Nelson Education Limited
Fraction of the Female-to- Male WageGap Explained by Various Factors14Copyright © 2011 Nelson Education Limited
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Ch 19 Microeconomics

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  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • This discussion question anticipates the signaling theory of education, discussed next… Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • “ Every customer in the market wants to enjoy the good supplied by the best producer.” Example: Seeing two movies that are half as entertaining is not a good substitute for seeing one movie that’s very entertaining. Having two CDs by artists that are half as good as U2 is not a good substitute for having one CD by U2. Copyright © 2011 Nelson Education Limited
  • Let’s break up the lecture for a few minutes and see if students can apply the material from the first part of this chapter. Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Copyright © 2011 Nelson Education Limited
  • Ch 19 Microeconomics

    1. 1. Lecture PowerPoint® SlidesLecture PowerPoint® Slidesto accompanyto accompanyPrepared byMarc Prud‘Homme, University of Ottawa 1
    2. 2. Chapter 19Chapter 19Earnings and DiscriminationEarnings and Discrimination2Copyright © 2011 Nelson Education Limited
    3. 3. Human Capital Human capital: the accumulation ofinvestments in people Ex. education, on-the-job training On average, people with more human capitalearn more than those with less human capital. Education as a signal3Copyright © 2011 Nelson Education Limited
    4. 4. A C T I V E L E A R N I N G 1:Discussion questionSuppose you were offered this choice:A. You could spend 4 years studying at the world’s bestuniversity, but you would have to keep your attendancethere a secret.B. You could be awarded an official degree from theworld’s best university, but you couldn’t actually studythere.Which do you think would enhance your future earningsmore?4Copyright © 2011 Nelson Education Limited
    5. 5. Earnings of University Graduates vs.High-School Graduates5Copyright © 2011 Nelson Education Limited
    6. 6. Compensating Differentials Compensating differential: a different wage dueto non-monetary aspects of a job Other things equal, workers in hard/unpleasant jobsget paid more than workers in easy/pleasant jobs A wage premium is paid to compensate workers forexposing themselves to risk/danger Ex. workers in high-rise construction or electricallinemen Wage difference dueto ability/heredity6
    7. 7. Case Study: Good Looks Pay People deemed more attractive than averageearn 5% more than people of average looks; andthe average-looking people earn 5-10% morethan below-average looking people.Why?1. Good looks matter for productivity2. Good looks indirectly related to ability3. Discrimination7Copyright © 2011 Nelson Education Limited
    8. 8. The Superstar Phenomenon The best singer vs. the best plumber: which oneearns more? One can supply every customer at a low cost,while the other cannot.8Copyright © 2011 Nelson Education Limited
    9. 9. In each case, identify which worker would earn more andexplain why.A. The best physical therapist on the planet orthe best writer on the planetB. A trucker that hauls produce or a trucker that haulshazardous waste from nuclear power plantsC. A graduate of a top college or an equally intelligent &capable graduate from lower ranked university.D. Someone who graduated from university with a 3.7GPA, or someone who graduated from the sameuniversity with a 2.4 GPA.A C T I V E L E A R N I N G 2Explaining wage differentials9Copyright © 2011 Nelson Education Limited
    10. 10. A. The best physical therapist on the planet orthe best writer on the planetThe superstar phenomenon:The best writer can service many more customersthan the best physical therapist.B. A trucker that hauls produce or a trucker that haulshazardous waste from nuclear power plantsCompensating differentials:The hazardous waste hauler earns more tocompensate for the higher risks.A C T I V E L E A R N I N G 2Answers10Copyright © 2011 Nelson Education Limited
    11. 11. C. A graduate of a top college or an equally intelligent &capable graduate from lower ranked university.The signaling theory of education:Employers assume the Ivy League grad has more abilitythan the state university grad.D. Someone who graduated from university with a 3.7 GPA,or someone who graduated from the same university witha 2.4 GPA.The human capital theory of education:A higher GPA reflects greater learning, which leads tohigher productivity and wages.A C T I V E L E A R N I N G 2Answers11Copyright © 2011 Nelson Education Limited
    12. 12. The Economics of Discrimination Discrimination: offering differentopportunities/rewards to similar individuals not onthe basis of productivity, but only due to personalcharacteristics (race, ethnic group, sex, age etc.) But there are usually differences in productivity-related characteristics as well:Quantity of educationQuality of educationLabour market experienceTypes of jobs12Copyright © 2011 Nelson Education Limited
    13. 13. Ratio of Female-to-Male Wages byOccupation, 1997 and 200613Copyright © 2011 Nelson Education Limited
    14. 14. Fraction of the Female-to- Male WageGap Explained by Various Factors14Copyright © 2011 Nelson Education Limited

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