Scenario

Differences in Human Capital

Compensating Differential

Differences in Natural Ability

Labor Unions

Major league hockey goalies earn more than minor league hockey goalies.

A law firm hires Valerie, a recent graduate from law school, and pays her an annual wage of $$40,000.$ It also hires Paolo, a second$-$year law student, and pays him an annual wage of $$30,000.$ Valerie and Paolo were born in the same country, attended the same university, and studied in the same graduate program.

Three engineers have the same amount of schooling and work experience, but earn different wages. One is a computer engineer who designs and tests new computers for an annual wage of $$50,000$ per year. Another is a chemical engineer who works in a nuclear lab and performs experiments on radioactive materials for an annual wage of $$75,000$ per year. The third is a civil engineer who performs daily inspections of cables on a suspension bridge for an annual wage of $$90,000$ per year.