Determinants of Earnings

Topics: Employment, Income, Labour economics Pages: 2 (548 words) Published: December 1, 2012
Determinants of Earnings
Improving someone’s success in the labour market is a main objective of both family and policy makers, especially those with low earning in recent years. In the classic view of labour earning, we assume that the skills of individuals are the dominant factor to determine the earnings’ level. However, the recent year study manifests multiple factors have been weighed more than before. To illustrate this new situation, it believes that individuals’ successes in labour market are quite differentiated from one’s family background support, capacities to contribute to production or service, genetics, the education level, and the working experience in the labour market. Specifically, the low earning individuals’ situation can be well-persuasive proof for it. An individual might hold various earnings at the same time such as the interest of saving, stock, fund of dividend income and property of real estate of individual. The developed labour market economy directs that an individual’s earning is equal to the number of production factors sold by the individual times the price of various elements. Personal income is equal to market income and transfer payment. A majority of market income comes from wages and salaries. Few of market income come from property rights. The transfer payment of the government is mainly for those old men’s social security. “In standard of earning equation for individuals of the same race and sex in Canada, between two thirds and four fifth of the variance of the natural logarithm of wages or of annual earning is unexplained by the above variables. ” This statement is said by Bowles (2001). A few of the variance is contributed by the unstable factor of earnings and response error. For example, from the more detailed Employers’ Manpower and Skills Practices Survey of 1693 British employers reported in Green, Machin and Wilkenson (1998). Of the somewhat more than a third of the establishments reporting the...
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