AP_Krugman_Textbook

the year, which works out to $20,000 per hour even if they worked 100-hour weeks.

Leaving out these extremes, there is still a huge range of wage rates. Are people really

that different in their marginal productivities?

A particular source of concern is the existence of systematic wage differences across

gender and ethnicity. Figure 73.2 compares annual median earnings in 2009 of workers

25 years or older classified by gender and ethnicity. As a group, white males had the

highest earnings. Women (averaging across all ethnicities) earned only about 76% as

much; African-American workers (male and female combined) only 69% as much; and

Hispanic workers only 64% as much.

716 section 13 Factor Markets

figure 73.2

Median Earnings by Gender

and Ethnicity, 2009

The U.S. labor market continues to show

large differences across workers accord-

ing to gender and ethnicity. Women are

paid substantially less than men; African-

American and Hispanic workers are paid

substantially less than white male workers.

Source:Bureau of Labor Statistics.

Hispanic

(male and

female)

African-

American

(male and

female)

Female (all

ethnicities)

White

male

$46,696

$35,724

$29,952

$32,292

45,000

$50,000

40,000

35,000

30,000

25,000

20,000

15,000

10,000

5,000

Annual

median

earnings,

2009

0

We are a nation founded on the belief that all men are created equal—and if the

Constitution were rewritten today, we would say that all peopleare created equal. So

why do they receive such unequal pay? In part, the pay differences may be due to dif-

ferences in marginal productivity, but we also must allow for the possible effects of

other influences.

Is the Marginal Productivity Theory of Income

Distribution Really True?

Although the marginal productivity theory of income distribution is a well-established

part of economic theory, closely linked to the analysis of markets in general, it is a

source of some controversy. There are two main objections to it.

First, in the real world we see large disparities in income between workers who, in

the eyes of some observers, should receive the same payment. Perhaps the most con-

spicuous examples in the United States are the large differences in the average wages

between women and men and among various racial and ethnic groups. Do these wage

differences really reflect differences in marginal productivity, or is something else

going on?

Second, many people wrongly believe that the marginal productivity theory of in-

come distribution gives a moraljustification for the distribution of income, implying