Question

After a rash of injuries and deaths in the Big Choke Coal Mine, members of the Parliamentary Workplace Safety Committee are holding public hearings about proposed regulations to increase the level of safety at the Big Choke Mine.

a) The Parliamentary Workplace Safety Committee argues that the proposed regulations will make the workers better off given the increased safety. Applying your knowledge of the neoclassical theory of compensating wages, use graphical analysis to evaluate this argument. Draw a graph for before and after the implementation of the proposed regulation. Explain each graph. (Assume there are two other mines in the coal mining industry.)

Answer 1

Neo-classical theory argues that payment of salary differentials compensates workers for risks of injury and death at the workplace. Scientific evidence for the argument is based over three decades on findings from econometric studies. Most scientific supports have been found to be unreliable.

Neoclassical theory claims that payment of wage differentials compensates for the risk of injury and death related to work. Empirical support is based in three decades on the results obtained from econometric studies. This paper discusses the neoclassical situation of wage differential payments.

We conclude that the neoclassical literature theory is also insufficient and lacks a practical view of manufacturing and communicating the health and safety risks associated with work.

Wage difference is a term used in the labor market economy to analyze the relationship of the wage rate to pain, risk, or other undesirable attributes. An additional income that should be provided to an employee that motivates him to take up a given unnecessary work in comparison with the other jobs being carried out is described as a compensatory differential also called a compensatory pay difference or an equalizing difference.

The pay disparity for a particularly desirable Position or one with special benefits may also be addressed, although in this case it would be a negative factor, which would be that a particular worker would be willing to accept a lower wage of a particularly desirable role than others.