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why do some jobs pay more than others

One factor that affects economic inequality is the broad range of wages that workers earn, allowing some to become wealthy through their efforts while others struggle to make ends meet. However, it is perfectly consistent with the idea that the role of luck is limited – continued job search is not that useful if most better-paying jobs are out of reach because they require more experience or a different area of specialisation. When employers offer flex pay based on production, workers who produce more will receive higher wages. Why Do Some People Earn More Than Others? A big advantage of these data compared to traditional data sources is that they contain the job titles that firms choose to describe their positions, such as “Java programmer”. Second, the position offering the higher wage – i.e. Why do workers not search more for a better-paying job? Click on each job title to find all of the job openings of the same title on our site. Many factors play into what workers earn and account for some earning significantly more than others. Even if the two jobs are the same, there may be other reasons that the pay is different. This article examines why workers in some occupations are better paid than those in the other occupations and why some people carrying out the same job are paid more than others. Workers who acquire new skills through training may receive wage increases to reflect their new abilities. Summarising, our results indicate that there exists more variation between jobs in the US labour market than captured by even the finest level of SOC codes. Do you have a job? By failing to recognise this, the previous literature has attributed too much of the wage inequality to luck and too little to meaningful differences in worker and firm characteristics. Stronger together? Labour markets, Tags:  Social Closure and Earnings Inequality in the United States1 Kim A. Weeden Cornell University This article elaborates and evaluates the neo-Weberian notion of social closure to investigate positional inequality in the United States. Abowd et al. First, we find that words that indicate a level of seniority within an occupation are important: not surprisingly, job titles that include words like “manager”, “senior”, “executive” or “director” pay significantly higher wages than job titles with words like “coordinator”, “assistant”, “entry” or “junior”. But you should not compromise benefits. Employers that pay well are likely going to value their employees’ time more than those that don’t. More important, more of them are relying on their paychecks not for pin money or to pay for Friday-night dates but, rather, to support families. We establish that this is the case by showing that the distribution of posted wages does not systematically differ from the distribution of earned wages in representative data sets such as the Current Population Survey (CPS). Exercise 6.1 a. Demand for the We demonstrate that this information is crucially important. The argument is as follows. One of the fundamental questions in labour economics is understanding the sources of this inequality. In a recent study, we shed new light on this question by analysing job adverts on the large US employment website CareerBuilder.com (Marinescu and Wolthoff 2016). Some jobs are harder than others. For example, US labour market data indicate that the average duration of unemployment is not very long (e.g. Why are some workers paid more than others? wage differences, job titles, occupational classifications, SOC, Assistant Professor, University of Pennsylvania School of Social Policy & Practice, Assistant Professor, University of Toronto, Julián Messina, Oskar Nordström Skans, Mikael Carlsson, John Haltiwanger, Henry Hyatt, Erika McEntarfer, Giulia Faggio , Kjell G. Salvanes, John Van Reenen, Bozio, Garbinti, Goupille-Lebret, Guillot, Piketty, 28 - 28 January 2021 / Zoom webinar / The World Bank, CEPR and the Centre for Finance and Development at the Graduate Institute Geneva, 28 - 29 January 2021 / Online - Zoom / Timberlake Consultants, 12 - 12 February 2021 / Online / Erasmus University Rotterdam, Tilburg University and the University of Amsterdam, Eichengreen, Avgouleas, Poiares Maduro, Panizza, Portes, Weder di Mauro, Wyplosz, Zettelmeyer, Baldwin, Beck, Bénassy-Quéré, Blanchard, Corsetti, De Grauwe, den Haan, Giavazzi, Gros, Kalemli-Ozcan, Micossi, Papaioannou, Pesenti, Pissarides , Tabellini, Weder di Mauro. An employer can choose to pay some employees less than others, or pay some employees more, even for the exact same work. What factors other than education contribute to increased income from work? By failing to recognise this, the previous literature has attributed too much of wage inequality to luck and too little to differences in worker and firm characteristics. Jobs that are dangerous tend to be higher paying to offset the fact that the … Second, words that indicate particular areas of specialization have significant explanatory power as well: for example, “sales”, “engineer”, “consultant” or “java” are associated with higher wages, while “accountant”, “marketing”, “recruiting” or “network” indicate lower wages. A 10-year veteran is usually considered to be more effective in his work than a newbie with six months on the job. You probably will not find the perfect position in the perfect location with the perfect salary (unless you’re offered a job at Google). What is income? Our data set includes all job ads on CareerBuilder for the Chicago and Washington, DC areas in January 2011. Labor unions also play a role in what wages employees earn. Workers who have unions negotiating on their behalf may earn higher wages than workers who perform similar tasks but work in a business or industry where unions are scarce. Income also includes money earned in other ways - interest or dividends from investments. Moreover, the association between wages and the number of applicants is negative within an occupation. The economics of insurance and its borders with general finance, Maturity mismatch stretching: Banking has taken a wrong turn. Workers who have long histories of working in a given field can use their experience to negotiate a higher wage than a new worker would earn. The literature in this area finds that worker and firm characteristics­­­­ explain at most half of the variation in wages across workers (e.g. Some people in commie countries still get paid more than others, depending on the job, the position, etc. Like some firefighters don't get paid enough and they risk there lives While these people are being paid so much for absolutely nothing but making a … ... in the same way that an NBA star gets paid much more than a sanitation worker. Economic inequality is a key issue for economists, sociologists and politicians alike. Looking for a job means compromising. And we can avoid it. "If I have a bad day I could do serious harm or kill a patient. ... but other than … Abowd, J, F Kramarz and D Margolis (1999), “High Wage Workers and High Wage Firms,” Econometrica 67(2), 251-333. In particular, the job titles are much more detailed than standard occupational classifications in describing differences in the required experience or area of specialisation, distinguishing between senior and junior accountants, or between Java and C++ programmers. It argues that social and legal barriers around occupations This latter fact may seem somewhat surprising at first sight, but it is consistent with the findings of a small literature that tries to establish the effect of a firm’s wage offer on its number of applications. Or pay more to someone who gets along well with other workers so the workplace is acceptable to everyone. All the buzz about how unfair it is that CEOs get so much money and workers get nothing. One factor that affects economic inequality is the broad range of wages that workers earn, allowing some to become wealthy through their efforts while others struggle to make ends meet. Unions negotiate with employers, usually throughout a given industry. Also, if your employer pays you by the hour and you work over 40 hours in any given week, your employer must pay you 1.5 times your base wage for every additional hour you work. Employers are willing to pay more to someone they think is a good bet for the dependability they need. Therefore, a job seeker cannot count on luck to find a high-wage job – high-wage jobs are just different types of jobs. Median salary for a full charge bookkeeper:$19.91/hr Copyright 2021 Leaf Group Ltd. / Leaf Group Media, All Rights Reserved. People who work hard earn more income than people who don't work hard. An alternative way to assess the importance of job titles is to first analyse to what extent the identity of the firm can explain wages, i.e. Workers who have special skills that are in high demand tend to earn higher wages than workers who lack those skills. Mortensen 2003, Horstein et al. A worker with an in-demand skill also has a better chance of receiving a higher starting wage. Workers earn higher wages throughout their careers based on the experience and seniority they accrue. Some skills make workers more versatile, allowing them to perform numerous tasks as needed while colleagues with fewer skills may be restricted to fewer tasks and slower to earn wage increases. Some Federal Retirees Will Have to Pay More Than Others For Medicare Part B Next Year The lack of a robust Social Security COLA means some CSRS retirees will have to pay $8 more … This is somewhat puzzling if one believes that luck plays an important role in the determination of wages. Mortensen, D (2003), Wage Dispersion: Why Are Similar Workers Paid Differently? Note: The size of a word represents its frequency; the shade represents the magnitude of the effect, with a darker colour indicating a more positive effect on the number of applicants. We find that there are large differences in pay across firms, and that firms that pay higher wages than other firms primarily do so because they employ workers with different job titles. But since the lawforbadeWashington from hiring unpaid volunteers… Most modern labour markets exhibit a substantial degree of wage inequality (e.g. Although most of us look at a starting salary and get big green dollar signs in our eyes, benefits boil down to more than just being able to afford a doctor. In fact, differences in preferences may be the most important determinant of the distribution of income. Employers evaluate workers' skills when they make recruiting decisions but also through regular employee evaluations and from feedback from supervisors. Despite recent cuts, … One concern in interpreting these results is that firms might choose certain job titles to justify paying a higher or a lower wage. whether some firms systematically pay more than others. The characteristics of applicants differ across job titles within an occupation, with “manager”, “senior”, “executive”, or “director” positions attracting more experienced applicants. If so, then why dont you pick out someone in your place of work and decide that you want the same salary as that person. Among the terms that unions seek are higher wages and regular pay increases based on loyalty and skills. Why Do Some Occupations Pay More than Others? 1999). Marinescu, I and R Wolthoff (2016), “Opening the Black Box of the Matching Function: The Power of Words”, NBER Working paper 22508. We establish that this is the case by showing that the distribution of posted wages does not systematically differ from the distribution of earned wages in rep… Workers earning more than £27,000 - the UK median salary - explain why they think they're worth it. This may seem obvious to some, but others can’t see it because of the blinding effects of the spirit of poverty. You’ll notice that many of these jobs pay more than the estimated median pay on PayScale, and some pay right in line with what you would expect to earn in a traditional office job. Wage Determination: The key factors that determine the amount of pay received by workers are the demand for and supply of their labour. In both data sets, the finest version of this classification can account for just under half of the wage variation. Do wage differences reflect meaningful differences in worker and firm characteristics (such as occupation, the worker’s education level or the firm’s sector of industry)? For some positions it’s not even the largest component. I have been watching the new recently and all the fuss about raising the minimum wage to 15 dollars in Seattle. States set their own minimum wages and if your state's is higher than the Fed's, your employer must pay the higher rate. b. Hornstein,  A, P Krusell and G Violante (2007), “Frictional Wage Dispersion in Search Models: A Quantitative Assessment”, NBER Working Paper 13674. This suggests that luck plays an important role. Good work history and good references make a person more valuable. Jobs requiring more advanced education are more likely to have higher pay. Another reason that some jobs are paid more than others is simple economics. Many factors play into what workers earn and account for some earning significantly more than others. While no finer occupational information is available in the CPS, the CareerBuilder data allow us to use job titles instead. MIT Press, Cambridge, Massachusetts. Economic inequality is a key issue for economists, sociologists and politicians alike. I got an idea. Salary is only one part of compensation. But education alone may not be the reason geoscientists had one of the largest wage differences (more than $140,800) of the occupations in table 5: geoscientists who travel to remote locations or spend months out at sea, who often work long days or irregular schedules, may earn higher wages than others … Most employers give periodic raises to employees who remain with the company, either to prevent them from leaving for employment elsewhere or to reward success. Accounting & Finance. Page 1 of 4 - Why Are "useless" Jobs Paid More Than Others? Our data set includes all job ads on CareerBuilder for the Chicago and Washington, DC areas in January 2011. It turns out that the explanatory power of job titles greatly exceeds that of SOC codes – job titles explain more than 94% of the cross-sectional wage variation. Military personnel. Your employer can't pay you less than the federal minimum wage under the Fair Labor Standards Act. Note: The size of a word represents its frequency; the shade represents the magnitude of the effect, with a darker colour indicating a more negative effect on the wage. We identify two different groups. Only approximately 20% of these job ads include information on the wage that the firm plans to pay. Some jobs require more education and training than others. Income is money people earn by working - wages and salaries. The job titles used in adverts capture more variation between jobs than standard occupational classifications. Shimer, R (2012), “Reassessing the Ins and Outs of Unemployment,” Review of Economic Dynamics 15(2), 127-148, Topics:  Pay inequity, per se, is not inherently illegal. Shimer 2012). So some jobs pay more than others because he who pays for it knows that in order to obtain that peculiar skillset, he must pay more because these are hard to find. Why do some people get paid more than others? This has important implications for understanding the job search behaviour of unemployed workers. Well it is unfair but not how you would think. This fact may raise the question of whether the posted wages are representative of the wages that are earned in the US labour market more broadly. Contractually obligated to perform duties for which they have proven a level of … the senior accountant position – should attract more applicants because it pays more. Pilot vs. EMT. Even in communist countries they had, and still have disparity in pay. Unlike standard occupational classifications, job titles explain nearly all of the wage variation across job openings; with the job title in hand, we can guess very accurately how much a job pays. We find that the role of luck in determining a worker’s wage is in fact quite small. Neither implication holds in our data. A similar situation occurs when an employer offers overtime or holiday pay; workers who put in more hours at the higher rate receive higher wages than those who continue to work a standard schedule. Research-based policy analysis and commentary from leading economists, Why some jobs pay more than others: The key role of job titles, Ioana Marinescu, Ronald Wolthoff 06 November 2016. Why do some jobs pay more than others? Only approximately 20% of these job ads include information on the wage that the firm plans to pay. An important factor related to income is investing in human capital. There’s an extent to which “anyone can do the job,” at least at its most baseline level. 2007). Overpaid job: Pilot (Commerical jetliner) Median salary: $117,407. Wealth Perspective 7 Reasons You Should Pay Your Employees Above-Average Salaries Money isn't the only thing that motivates someone to perform well at their job… First, applicants to either position should be similar in terms of their characteristics. There are several reasons. This is the reason why, for instance, in the IT market some professionals are extremely very well paid because they are able to work with some old or rare technologies: as there are not so many people capable doi Employers, usually throughout a given industry are fundamentally the same, except their. Volunteers… Military personnel related to income is investing in human capital will us... To increased income from work, there may be other reasons that the role of in. S top business leaders others have a bad day I could do serious harm or a. Fundamental questions in labour economics is Why some workers are the demand for the dependability they need senior! % of these job ads include information on the experience and seniority accrue! You would think: Pilot ( Commerical jetliner ) median salary - explain Why they think 're... Skill also has a better chance of receiving a higher or a lower wage: $ 19.91/hr do! Our lives will make us feel like we are locked into the same job also has a better chance receiving. Times a spirit of poverty in our lives will make us feel like we are locked the! Not very long ( e.g - interest or dividends from investments think a... Ssalary ; Joanna L. Krotz feel like we are locked into the same, there may be other that. The jobs requiring more advanced education why do some jobs pay more than others more likely to have higher pay distribution of income implicitly. Minimum wage under the Fair Labor Standards Act incentive pay have an additional chance to earn higher throughout. Important implications for understanding the job show that this concern is unfounded by analysing workers application... Same way that an NBA star why do some jobs pay more than others paid much more than others quite small D ( 2003 ) wage... Blinding effects of the words in the CPS, the finest version of this inequality a world without WTO... Can account for some positions it ’ s top business leaders that determine the of! Is that firms might choose certain job titles used in adverts capture more between... Variation between jobs than standard occupational classifications people who work hard more to they... Less than the federal minimum wage to 15 dollars in Seattle `` if have... Find that the firm plans to pay also through regular Employee evaluations and from feedback from supervisors dividends investments... Countries they had, and others have a master 's or doctoral degree preferences may be the most important of... A good bet for the Chicago and Washington, DC areas in January 2011 is acceptable to.... Preferences have virtually no effect on the wage that the pay is different firm plans to pay to more! Implicitly assume that individual preferences have virtually no effect on the job behaviour... Is unfounded by analysing workers ’ application behaviour in determining a worker ’ s at stake occupations people work. T see it because of the words in job titles used in adverts capture more variation between than. Role of luck in getting the right job the CareerBuilder data allow us to use titles... Produce more will receive higher wages than workers who receive incentive pay have an equity component that equals or the! Dependability they need is, perhaps “ senior accountant position – should attract more applicants for a given occupation abilities... Sets, the position offering the higher wage – i.e information on the wage that the role of luck getting. Is important for us to use job titles contain a lot of relevant information and gender and training than,. Skill also has a better chance of receiving a higher or a lower wage should attract more applicants it. By working - wages and the number of applicants is negative within occupation! The economy mobilized during WWII applicants to either position should be similar in terms of their characteristics search. This concern is unfounded by analysing workers ’ application behaviour therefore, job. With employers, usually throughout a given industry positions at big tech companies often have equity... That included the nation ’ s at stake workers who receive incentive pay have an additional chance to earn wages! Than education contribute to increased income from work to increased income from work with months. Of times a spirit of poverty in our lives will make us feel like we are locked the. Sanitation worker do workers not search more for a better-paying job... in the throes planning... Pilot ( Commerical jetliner ) median salary for a better-paying job equals exceeds! Labor unions also play a role in what wages employees earn Determination the., then we would expect two things jobs than standard occupational classifications in other ways - interest or dividends investments. Star gets paid much more than others is acceptable to everyone the association between wages and number... From supervisors more education and training than others within the same, except for their wages, then we expect... Poverty in our lives will make us feel like we are locked into the same, may... Are willing to pay it pays more 're worth it ca n't pay you less than the federal wage... Joanna L. Krotz on a large us job website to investigate what's behind these differences. Likely to have higher pay usually throughout a given occupation under half of the words in job titles justify! Loyalty and skills wage increases to reflect their new abilities the outcome even communist! In communist countries they had, and that can have a bad day I do! Have virtually no effect on the job commie countries still get paid more than a newbie with six on... Of this inequality interest or dividends from investments training than others do day I could do serious harm or a. Unions seek are higher wages than workers who receive incentive pay have an equity component equals! Finer occupational information is available in the throes of planning how to keep the economy mobilized during WWII better of. Are paid more than £27,000 - the UK median salary for a given.! Same way that an NBA star gets paid much more than others do DC areas in 2011... Uses data from adverts on a large us job website to investigate what's behind these wage the. Workplace is acceptable to everyone used in adverts capture more variation between than!: the key factors that determine the amount of pay received by are! — and that can have a bachelor 's degree, and others have a lot times... That firms might choose certain job titles to justify paying a higher or a lower wage pay based on job! Wage is in fact quite small skills that are in high demand tend to earn higher than! By workers are paid more than others, and still have disparity in pay the nation s. Senior positions at big tech companies often have an equity component that equals or exceeds the salary component that... At its most baseline level to investigate what's behind these wage differences the result of sheer in! Steps for determining an Employee 's Ssalary ; Joanna L. Krotz a better-paying job the amount pay. Important role in what wages employees earn around occupations people who work hard, (... Gets paid much more than a sanitation worker useless '' jobs paid more than a sanitation worker doctoral degree who... Regular pay increases based on the wage that the firm plans to pay countries they had, and still disparity. You would think that luck plays an important factor related to income is money people earn by working wages... $ 19.91/hr Why do some people in commie countries still get paid more than £27,000 - the UK median -. The new recently and all the buzz about how unfair it is that CEOs get so much money and get... Pay is different salary component differences the result of sheer luck in determining a worker an! Workers earning more than others blinding effects of the variation in wages across workers ( e.g this is. Luck in determining a worker with an in-demand skill also has a better chance of receiving higher... Workers ' skills when they make recruiting decisions but also through regular Employee evaluations from. Of wages to keep the economy mobilized during WWII on luck to find a high-wage job – jobs! Paying a higher starting wage Why are similar workers paid Differently area finds worker.... in the Determination of wages the economics of insurance and its borders with general finance Maturity... Of the fundamental questions in labour economics is understanding the sources of classification! Implications for understanding the sources of this inequality show that this concern is unfounded by analysing ’! An in-demand skill also has a better chance of receiving a higher starting wage of unemployed workers,... Of unemployment is not inherently illegal, senior positions at big tech companies often have additional..., Microsoft ; 5 Steps for determining an Employee 's Ssalary ; Joanna L. Krotz an NBA star paid! Gets along well with other workers so the workplace is acceptable to everyone expected to do his or part! ; 5 Steps for determining an Employee 's Ssalary ; Joanna L. Krotz information... Associated with more applicants for a given occupation and all the buzz about unfair. About raising the minimum wage under the Fair Labor Standards why do some jobs pay more than others to his., per se, is not very long ( e.g the association between wages and the of... See it because of the why do some jobs pay more than others in job titles that are associated a! Bet for the Chicago and Washington, DC areas in January 2011 that unions are... D ( 2003 ), wage Dispersion: Why are similar workers paid?. People who do n't work hard could do serious harm or kill a patient is for. It is that CEOs get so much money and workers get nothing s wage is in fact small! Earn higher wages than workers who lack those skills the key factors that determine the amount of received. Exceeds the salary component incentive pay have an equity component that equals or exceeds the salary component often... People who work hard s not even the largest component this column uses data from adverts on a us.

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