Why There Are Differences in the Earnings of Workers in the Economy.

The first factor goes to compensating wages differentials which arises due to non-monetary characteristics of different jobs. Jobs considered intrinsically less attractive compared to average jobs will tend to pay higher wages. For example, coal miners who work at high risk due to unpleasant working environment are paid more than others with similar levels of education. Besides that, odd working hours such as night shifts pays negative compensating differentials as well. The second factor is human capital which is the accumulation of investments in people, such as education and on the job training. Jobs that require more education and training will be less attractive. In order to attract works, firms often pay higher wages than other jobs that are similar in other ways but require less training. Education, which is in terms of theory plays a vital role in human capital requirement. The higher the educational level, the more the exposure and the more knowledgable the particular person is. As a result, the productivity of the particular worker is higher compared to others. On the job training, practically, enhance the experience of the worker in the field and make less mistakes during work.

 Differences in ability is the one of the factors in which firms will be willing to pay higher wages to those with greater ability to do a job well based on their talent, intelligence, motivation and perseverance. For example, two advertising managers have equal education and training, but manager A, being more talented and higher natural abilities, can design better advertisement campaigns and attract twice as many high paying clients as can manager B. Hence, firm will be willing to pay manager A twice as much as B. On the other hand, experience provides a signal of ability to employers. Hiring or continuing hiring an experienced employee with a history of advancement and accomplishment always has lower risk compare to hiring a new and untested worker whose basic and