Compensating Differential
Wage differential' is a term used in labour economics to analyze the relation between the wage rate and the unpleasantness, risk, or other undesirable attributes of a particular job. A compensating differential, which is also called a compensating wage differential or an equalizing difference, is defined as the additional amount of income that a given worker must be offered in order to motivate them to accept a given undesirable job, relative to other jobs that worker could perform. One can also speak of the compensating differential for an especially desirable job, or one that provides special benefits, but in this case the differential would be negative: that is, a given worker would be willing to accept a lower wage for an especially desirable job, relative to other jobs.
The idea of compensating differentials has been used to analyze issues such as the risk of future unemployment, the risk of injury, the risk of unsafe sex, the monetary value workers place on their own lives, and in explaining geographical wage differentials.
Read more about Compensating Differential: Geographical Wage Differentials, The Theory, The Empirical Results Found in The Literature
Famous quotes containing the word differential:
“But how is one to make a scientist understand that there is something unalterably deranged about differential calculus, quantum theory, or the obscene and so inanely liturgical ordeals of the precession of the equinoxes.”
—Antonin Artaud (1896–1948)