Of the theories listed below,which do the best job of explaining why educated people are paid more than uneducated people?
A) human-capital and price-fixing
B) human-capital and signaling
C) wage-differential and derived-demand
D) cost-allocation and compensating differentials

Question

Quizplus · Accepted Answer

The human-capital theory suggests that education and training increase productivity and earnings, which justifies higher wages. The signaling theory proposes that education signals to employers that a worker is capable and dedicated, and therefore deserving of higher wages. The wage-differential theory emphasizes how labor market imperfections (such as discrimination) can result in wage differences between groups. The derived-demand theory suggests that changes in demand for goods and services can affect the wages paid to workers in related industries. The cost-allocation and compensating differentials theories are less relevant to explaining why educated people are paid more than uneducated people. Among the options listed, the human-capital and signaling theories provide the most compelling explanations for the observed wage differentials between educated and uneducated workers.

Of the Theories Listed Below,which Do the Best Job of Explaining