Estimates of the compensating wage differentials associated with particular job characteristics are valid only if
A) all other factors that influence worker's wages are held constant.
B) nonwage characteristics of the job are allowed to vary by sector.
C) firms are willing to pay higher wages to more skilled workers.
D) the compensating wage differential is positive.
E) the firm provides nonpecuniary compensation for risks that workers encounter on the job.

Question

Quizplus · Accepted Answer

Compensating wage differentials theory suggests that wages are adjusted for job characteristics that workers find undesirable. For estimates of these differentials to be valid, all other factors influencing wages must be controlled for, ensuring that the observed wage differences are indeed due to the job characteristics in question, not other variables.

Estimates of the Compensating Wage Differentials Associated with Particular Job