Given identical skills, those working under relatively onerous or risky
conditions earn more than those working in pleasant or safe conditions.
For example, construction workers who work the “high iron,” assembling
the frames for skyscrapers, are paid more than workers who do similar
work at ground level. The reason is simple: Risk and unpleasantness
reduce the supply of labour, thus raising the wage above what it would
otherwise be. Different working conditions in different jobs thus lead to
compensating differentials, as we discussed in Chapter 13. These wage
differentials are not temporary—they are equilibrium wage differentials.
Many jobs involve dangerous or unpleasant working conditions. Wages
in such jobs are generally higher than in other jobs requiring comparable
skills. These are called compensating differentials.
Sergio Azenha/Alamy Stock Photo
- Inherited Skills
Large incomes will be earned by people who have scarce skills that
cannot be taught and that are in high demand—for example, an NBA