Question

1. Define compensating differential and give original examples (not already included in the book or power points) of different jobs that earn higher wages and some that earn lower wages because of compensating differentials.

2. Go to the Education Pays (Links to an external site.) page on the Bureau of Labor Statistics website. Compare and contrast the different levels of education in relation to average wage and unemployment rate.

3. Explain the benefits of higher education in terms of the unemployment rate and average salary figures in the United States.

4. How does this reflect on your own decision to invest in your human capital?

5. Also, go to the BLS Occupational Outlook Handbook (Links to an external site.) and look up two careers that you may be interested in pursuing.

6. Does the information given about these careers match your expectations?

7. Is there expected growth of jobs in these careers? How might it affect your likelihood of finding a job after graduation?

Answer 1

1.

Compensating differential is the approach that involves paying more to those individuals who perform the jobs that are more risk, or unpleasant or disliked by most of the people. Here, more salary is paid to those who take the job and do it by taking more risk and work in difficult scenarios.

One example can be drawn from the manufacturing organization where a person doing a cleaning job involving hazardous chemicals gets higher salary in the plant, and a clerk doing a sitting job in comfortable environment gets lower wage. It is due to the reason that cleaner person is in difficult and unpleasant scenario of work, so compensating differential is applied to pay him more to get the job done. The another example is of journalists who work in the field, go to the sensitive areas and do the reporting. These locations are very difficult, unpleasant and threat to life. It makes news agencies or channels to pay these journalists, a higher wages so that to compensate for the challenges taken up by them. In contrast to it, somebody doing the backroom work, will be paid a lower wage. It is due to the compensating differential phenomenon.

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3.

Benefits of higher education in terms of unemployment rate is that people with higher education get the job with relative ease as they can be hired for good paying jobs when unemployment rate is low and can be hired at a lesser wages when the unemployment rate is high. So, even if the unemployment rate is high, there is a higher scope of getting employed when somebody is equipped with higher education. It makes the person to remain either above or near the average salary being paid to the employees in the USA.

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4.

It makes positive impact upon my decision and I make more investment in human capital development. It brings higher education, exclusive skills and abilities, that can create more job opportunities. Hence, it increases the probability of getting employed and become human resource of competitive advantage. So, I make investment in human capital, more positively.

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