1. Earnings, Productivity, and the Job market
Chapter 13
Earnings, Productivity, and the Job market

2. Overview Signaling Sources of earning differences
Productivity and employment
Employment discrimination
Non-pecuniary job characteristics
Compensating wage differentials
Automation and employment

3. effective time manager
Signaling
Who would you hire? A. B.
Person A
Person B
hard working
lazy
intelligent
unintelligent
critical thinking
spaces out
persistent
quitter
experienced
inexperienced
effective time manager
disorganized

4. Who Would You Hire? Scenario 1
Person A
Person B
Person C
School: Harvard
Degree: Business Administration
School: University of Florida
School: West Virginia Community College

5. Who Would You Hire? Scenario 2
Person A
Person B
Person C
School: Florida State
Degree: Finance
GPA: 3.4
GPA: 4.0

6. Who Would You Hire? Scenario 3
Person A
Person B
Person C
School: Florida State
Degree: Economics
GPA: 3.4
Minor: Math
Summer Internship
Volunteer Work
Minor: Sociology
Minor: None

7. Signaling
The school you attend, the degree you get, the classes you take, your GPA, your internship experience, are all signals about yourself that you send to other people (including potential employers)

8. Sources of Earning Differences
1. Worker productivity and specialized skills
More productive and more highly skilled workers earn more money.

9. Sources of Earning Differences
Higher output per worker → higher wages
This is true:
A. Across countries: the reason employees in the U.S. make more than workers in most foreign countries
B. Across time: reason people make more today than they did 50 years ago

10. Sources of Earning Differences
Tournament Pay: A type of compensation in which the top performer receives higher rewards than other competitors, even if the others perform at only a slightly lower level

11. Examples of Tournament Pay

12. Sources of Earning Differences
2. Worker preferences
Greater desire to make money = earn more money

13. Sources of Earning Differences
3. Race and Gender
Employment Discrimination: Restricting employment and earning opportunities on the basis of race, gender, or religion (not productivity)
Employer based discrimination
Customer based discrimination

14. Employment Discrimination
To isolate employment discrimination, we must:
1. Adjust for differences between groups in education, experience, and other productivity related factors
2. Make comparisons between similarly qualified groups of employees who differ only in regard to race (or gender or whatever you are testing).

15. Employment Discrimination

16. Employment Discrimination
Women
Actual
Adjusted
White
100
African-American 77 84 89 92
American Indian 79 94 98
Asian-American
104 91
107
Mexican-American 65 88 73 93
Other Hispanic 75 83

17. Other Sources of Earning Differences
Immobility of labor
Cost of living differences

18. Non-pecuniary job characteristics
Non-wage characteristics of a job that influence how employees evaluate the job
Such as:
Working conditions, prestige, variety, location, freedom, responsibility, etc.

19. Compensating wage differentials
Wage differences that compensate workers for undesirable non-pecuniary job characteristics

20. Automation
Automation: production technique that reduces the amount of labor necessary to produce a good or service
Often replacing people with machines
Ex. Self check-out lines

21. Automation
Is automation destroying jobs and causing unemployment?

22. Review 1. What do we mean by signaling
2. Know the sources of earning differences
3. Know the definition of tournament pay
4. Know how to effectively study employment discrimination (or anything else)

23. Review
5. Know what we mean by non-pecuniary job characteristics and compensating wage differentials
6. Know the relationship between automation and employment.

24. Thank You!