Question

1) Consider each of the following pairs of occupational titles. Using the theory of compensating wage differentials, explain which of the pair is likely to earn higher wages and why.

a) transmission line repairer vs. high-voltage transmission line repairer

b) long-distance trucker vs. delivery truck driver

Answer 1

Compensating wage differential is a theory which mentions that a worker has to be given an additional amount of income in order for them to get motivated to accept an undesirable job.

a) High voltage transmission line repairer is a much riskier and undesirable job, thus he will earn a higher wage than just a transmission line repairer.

b) Long-distance trucker will be paid a higher wage as he will have to lead an uncomfortable life for the better part of his journey, a delivery truck driver has the comfort of his house at the end of the day.