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Family4 Wages


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Family4 Wages

  1. 1. Work, Wages Wage Differentials <ul><ul><li>Why do similar jobs pay different wages? </li></ul></ul><ul><ul><li>Why do similar workers receive different salaries? </li></ul></ul>
  2. 2. <ul><li>Average Annual Wages in Selected Occupations, 2007 </li></ul>Dentists Lawyers Petroleum Engineers Financial Managers Economists Computer programmers Registered Nurses Police Officers Elem. School Teachers Social workers Barbers, hairdressers Construction workers Cashiers Fast Food Cooks $147,000 118,000 114,000 106,000 86,700 72,000 62,480 50,670 50,000 47,000 26,000 33,800 18,400 17,000 Source: Bureau of Labor Statistics, 2007 Occupation Annual Average Wages
  3. 3. Highest Paid CEOs, 2005 Name Company Total Pay (millions) Richard Fairbank Capital One Financial $249.4 Terry Semel Yahoo 230.6 Henry Silverman Cendant 140.0 Bruce Karatz KB Home 135.5 Richard Fuld, Jr. Lehman Brothers 122.7 Ray Irani Occidental Petroleum 80.7 Lawrence Ellison Oracle 75.3 John Thompson Symantec 71.8 Edwin Crawford Caremark Rx 69.7 Angelo Mozilo Countrywide Financial 69.0
  4. 4. Hourly Earnings By Occupation, 2006 Occupational Group Hourly Wage Management, Business, And Financial $29.09 Installation, Maintenance, And Repair 18.68 Sales Workers 17.12 Office and Administrative Support 14.83 Service Workers 11.84 Farming, Fishing, And Forestry 9.85
  5. 5. <ul><li>Human Capital: Skills, education, experience </li></ul><ul><li>Produced by: </li></ul><ul><li>1) Families (investments of time, money, resources) </li></ul><ul><li>2) Education gained in schools (K – 12 and college) </li></ul><ul><li>3) Skills acquired while working, on-the-job training </li></ul><ul><li>Human capital theory: </li></ul><ul><ul><li>More schooling improves productivity </li></ul></ul><ul><ul><li>Lower quit and absentee rates </li></ul></ul><ul><ul><li>Less likely to abuse drugs and alcohol </li></ul></ul><ul><li>Differences in time preferences </li></ul><ul><ul><li>presented-oriented people acquire less education </li></ul></ul><ul><ul><ul><li>not willing to sacrifice present consumption without a large increase in future income, discount future income </li></ul></ul></ul><ul><ul><li>future-oriented people acquire more education </li></ul></ul><ul><ul><ul><li>willing to sacrifice present consumption for a small increase in future income, value future income </li></ul></ul></ul>Wage Differentials: Workers are different
  6. 6. <ul><li>Non-competing skills </li></ul><ul><li>Doctors and computer programmers don’t compete in the same labor market </li></ul><ul><li>Compensating wage differentials = </li></ul><ul><li>extra pay that an employer must provide a worker for some undesirable job characteristic that does not exist in alternative employment </li></ul><ul><ul><li>Higher risk of injury or death </li></ul></ul><ul><ul><li>Lower job status/prestige </li></ul></ul><ul><ul><li>Job location </li></ul></ul><ul><ul><ul><li>in cities with lower amenities </li></ul></ul></ul><ul><ul><ul><li>In cities with greater cost of living </li></ul></ul></ul><ul><ul><ul><li>To attract workers with longer commute </li></ul></ul></ul><ul><ul><li>Less job security </li></ul></ul><ul><ul><ul><li>Private sector vs government </li></ul></ul></ul><ul><ul><li>Prospect of wage advancement </li></ul></ul><ul><ul><ul><li>Jobs with greater wage advancement have lower starting wages </li></ul></ul></ul><ul><ul><li>Flexible hours </li></ul></ul>Wage Differentials: Jobs are different
  7. 7. <ul><li>Firm size </li></ul><ul><ul><li>Large firms pay higher wages than small firms because </li></ul></ul><ul><ul><ul><li>More likely to be unionized </li></ul></ul></ul><ul><ul><ul><li>Workers more productive? better training, capital </li></ul></ul></ul><ul><li>Higher wages to prevent turnover </li></ul><ul><ul><li>Firms will pay above-market wages when hiring and training costs are high. </li></ul></ul><ul><li>Costly to monitor shirking </li></ul><ul><ul><li>Firms will pay above-market wages where it is costly to monitor employee performance or the employer’s cost of poor performance is high. </li></ul></ul><ul><li>Costly job search </li></ul><ul><ul><li>Information is costly - time </li></ul></ul><ul><li>Geographic immobilties </li></ul><ul><ul><li>Costs of moving deters migration to areas with higher wages </li></ul></ul><ul><li>Worker’s tastes for nonwage aspects of jobs </li></ul><ul><ul><li>job security, location, commute, risk, co-workers </li></ul></ul><ul><ul><li>Women prefer shorter commute? May accept lower wages </li></ul></ul>Wage Differential: Other Explanations
  8. 8. Fringe Benefits as a Proportion of Compensation
  9. 9. Relative Growth of Fringe Benefits
  10. 10. Physical appearance <ul><li>Hamermesh & Biddle (1994) </li></ul><ul><ul><li>penalty & premium for appearance </li></ul></ul><ul><ul><ul><li>actually larger for men </li></ul></ul></ul><ul><ul><li>“ plain” earn 5-10% less </li></ul></ul><ul><ul><li>“ beautiful earn 5% premium </li></ul></ul><ul><li>Averett & Korenman (1996) </li></ul><ul><ul><li>NLSY & impact of obesity </li></ul></ul><ul><ul><li>women have 15% penalty </li></ul></ul><ul><ul><ul><li>lower penalty for men </li></ul></ul></ul><ul><ul><ul><li>lower penalty for Black women vs. White women </li></ul></ul></ul>
  11. 11. Ratio of Female to Male Hourly Earnings <ul><li>Wage gap decreased because </li></ul><ul><li>skills of women have risen </li></ul><ul><li>occupational distributions have shifted in favor of women </li></ul><ul><li>decline in unionism has decreased male wages relative to female wages </li></ul><ul><li>discrimination has declined </li></ul>
  12. 12. Ratio of African-American to White Weekly Earnings
  13. 13. Occupational Distribution by Gender, 2006 <ul><li>Women are 47% of the employed labor force </li></ul>
  14. 14. Occupational Distribution by Race, 2006 <ul><li>African-Americans are 11% of employed labor force </li></ul>