Differences in labor earnings are the result of wage differentials and the number of hours worked....

Differences in labor earnings are the result of wage differentials and the number of hours worked. Explain each of the following reasons for wage differentials: (a) occupational immobility, (b) compensating differentials, (c) cost of acquiring skills and (d) geographical immobility.

Expert Solution

Wage differentials is a term used in economics which is used to explain the difference in wage payments given to same skilled labour in different industries or region. There may be different reasons for such differences in wage.

A)occupational immobility: occupational immobility is when a labour cannot switch between different occupations and hence is limited to one occupation maybe because he doesn't possess still set for another job

B) Compensating differentials in wage differentials is when a person is paid more than the income, a compensation, in order to provide for an incentive for him to do an undesirable work or something he wouldn't do at the existing income.

C) cost of acquiring skills is when a person cannot acquire a certain skills because it is not affordable by him and hence he is forced to do a job which requires lower skills and therefore he earns a lower income.

D) Geographical immobility is when the labour is immobile and it is not physically possible for him to transport to different locations and he is bound by Geographical proximity which makes him work in that location only this makes the worker unable to travel to different locations with bigger wages and therefore wages differ.

Rahul Sunny answered 2 years ago

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