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  • Wage Differentials

  • The Minimum WageFederal government and states set a minimum wageAn effective minimum wage creates a wage floor above the equilibrium wage

  • The Minimum WageIf the minimum wage is below or equal to the equilibrium wage, it guarantees workers a minimum income and does not result in unemployment

    But if it set above the equilibrium wage, unemployment could result

  • Year Wage Year Wage 1939 30 cents 1976 $2.20 1945 40 cents 1977 $2.30 1950 75 cents 1978 $2.65 1956 $1.00 1979 $2.90 1965 $1.25 1980 $3.10 1967 $1.00 1981 $3.35 1968 $1.15 1990 $3.80 1969 $1.30 1991 $4.25 1970 $1.45 1996 $4.75 1971 $1.60 1997 $5.15 1974 $1.90 2007 $5.85 1975 $2.00 2008 $6.55 2009 $7.25

  • Wage DifferentialsHourly wages and annual salaries differ greatly among occupations

    Due to the effects of supply and demandWorkers in industries with high labor demand or low supply are likely to earn higher wages than workers in industries with low labor demand or high supply

  • Wage DifferentialsAlso contributing: human capital, compensation for undesirable work, market imperfections and MRP differencesTied to communityUnion and government licensingDiscriminationDisabilityBut.models do not take into account salaries of workers paid by the year regardless of daily output or commissions and bonuses that are awarded

  • Marginal Revenue ProductivityStrength of the labor demand differs among occupations due to how much various occupational groups contribute to the revenue of their respective employersRevenue contribution depends on the workers productivity and the strength of the demand for the products that are helping to produceEx. Professional Athletes

  • Wage Differentials Notes

  • The Minimum WageFederal government and states set a minimum wage

  • The Minimum WageIf the minimum wage is below or equal to the equilibrium wage, it guarantees workers a minimum income and does not result in unemployment

    But if it set above the equilibrium wage, unemployment could result

  • Year Wage Year Wage 1939 30 cents 1976 $2.20 1945 40 cents 1977 $2.30 1950 75 cents 1978 $2.65 1956 $1.00 1979 $2.90 1965 $1.25 1980 $3.10 1967 $1.00 1981 $3.35 1968 $1.15 1990 $3.80 1969 $1.30 1991 $4.25 1970 $1.45 1996 $4.75 1971 $1.60 1997 $5.15 1974 $1.90 2007 $5.85 1975 $2.00 2008 $6.55 2009 $7.25

  • Wage DifferentialsHourly wages and annual salaries differ greatly among occupations

    Due to the effects of supply and demand

  • Wage DifferentialsAlso contributing:

    But.models do not take into account salaries of workers paid by the year regardless of daily output or commissions and bonuses that are awarded

  • Marginal Revenue ProductivityStrength of the labor demand differs among occupations due to how much various occupational groups contribute to the revenue of their respective employersRevenue contribution depends on the workers productivity and the strength of the demand for the products that are helping to produce

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