Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 6 The Economics of Labor Markets Chapter 19 of 36 Earnings and Discrimination Section 8 of 16 … According to the human capital theory view of education, schooling and training raises workers' wages because they become more productive. Economists have proposed an alternative, signaling theory, which emphasizes firms use educational attainment to sort likely high-ability and low-ability workers. According to this view, when people earn a college degree they do not necessarily become more productive because of the education itself but people do signal their potential higher productivity to prospective employers because it’s easier for higher-ability people to earn a college degree. … In the similar advertising signaling theory the advertisement itself may contain no real information but the firm signals product quality to consumers by its willingness to spend on advertising. In the education signaling theo...
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Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 6 The Economics of Labor Markets Chapter 19 of 36 Earnings and Discrimination Section 7 of 16 … How substantial are the economic benefits of good looks and beauty? Economists Daniel Hamermesh and Jeff Biddle addressed this in a 1994 study of individuals in the U. S. and Canada. The economists examined how much wages depended on the standard determinants such as education and experience and how much their wages depended on physical appearance. … The study found having good looks results in higher wages. People who were deemed · to have better-than-average looks earned 5 percent more than people with average looks · to have average looks earned 5 to 10 percent more than people with less-than-average looks Results were similar for both men and women. … Good looks are useful in any job in which workers work in public including acting, sales, and waiting on tables. People return and buy more just to see the ...
Why is it important to understand economics? First, watch this short video: https://www.youtube.com/watch?v=CE5eJbaHL8s Mostly from article: Why it's Important to Understand Economics William Walstad, University of Nebraska , December 1, 1998 The case for economic literacy is a strong one. George Stigler, a Nobel Laureate in economics, probably stated it best almost three decades ago when he wrote: "The public has chosen to speak and vote mainly on economic problems, so the only open question is how intelligently the public speaks and votes." … In Stigler's view, economic literacy is special because it contributes to two classes of knowledge. #1 First, it serves as a "means of communication among people, incorporating a basic vocabulary or logic so frequently encountered the knowledge should be possessed by everyone." #2 Second, it is a "type of fundamental knowledge frequently needed and yet it is not susceptible to easy transmission from experts....
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 6 The Economics of Labor Markets Chapter 19 of 36 Earnings and Discrimination Section 6 of 16 … Besides training and experience, ability, effort and chance determine how much one earns. Ability: Why are major league baseball players paid more than minor leaguers? The higher wage is not a compensating differential. It’s more pleasant to play in the major leagues, e.g. better playing fields and locker rooms. The major leagues do not require more years of education nor experience. Mostly, major league players earn more because they have greater natural ability. People differ in physical and mental attributes because of heredity and environment. Some people are physically strong others weak, some are very smart others less smart. … Effort: Some people work hard, others are lazy. Those who work hard are more productive and can earn higher wages. Firms often reward workers directly by paying them based on the...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 6 The Economics of Labor Markets Chapter 19 of 36 Earnings and Discrimination Section 5 of 16 … (This article here in chapter) In the early 1940s, about one in three American workers worked in manufacturing. Today, that figure is about one in ten. According to former Secretary of Labor Robert Reich, the loss of manufacturing jobs is not a reason to worry, but it is a reason to study hard. … Nice Work If You Can Get It - By Robert B. Reich It's hard to listen to a politician or pundit these days without hearing America is "losing jobs" to poorer nations, manufacturing jobs to China, back-office work to India, just about every job to Latin America. This lament distracts our attention from the larger challenge of preparing more Americans for better jobs. It's true U.S. manufacturing employment has been dropping for many years, but that's not primarily due to foreigners taking these jobs. ...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 6 The Economics of Labor Markets Chapter 19 of 36 Earnings and Discrimination Section 4 of 16 … Studies have shown the earnings gap between workers with high skills and low skills has increased over recent decades. Table 1 gives comparative data on the average earnings of college graduates and high school graduates. For men · in 1980, a man on average earned 44 percent more with a college degree than without one · by 2005, this figure had risen to 87 percent For women · in 1980, a woman on average earned 35 percent more with a college degree than without one · by 2005, this figure had risen to 72 percent … Why has the gap in degree/no-degree earnings widened in recent years? Economists have proposed two hypotheses, both suggest the demand for skilled labor has risen over time relative to the demand for unskilled labor. This shift in demand for skilled labor has led to a corresponding change in wages, w...
Mostly summarized from Gregory Mankiw’s Principles of Economics, 5th Ed. PART 6 The Economics of Labor Markets Chapter 19 of 36 Earnings and Discrimination Section 3 of 16 … In economics, the word “capital” usually refers to the economy's stock of equipment and structures. Capital stock includes a farmer's tractor, a manufacturer's factory, and a teacher's chalkboard. Capital is a factor of production that itself has been produced. … There is another less tangible type of capital just as important to the economy's production - human capital. Human capital is the skills, knowledge, and experience possessed by an individual. The most important type of human capital is education. Education is an expenditure of resources to raise one’s future productivity. Unlike an investment in other forms of capital, an investment in education is for a specific person. … Workers with more human capital are mostly paid more. College graduates in the U.S. earn almost twice that of wo...