Compensating differential
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Wage differential is a term used in labour economics to analyze the relation between the wage rate and the unpleasantness, risk, or other undesirable attributes of a particular job. A compensating differential, which is also called a compensating wage differential or an equalizing difference, is defined as the additional amount of income that a given worker must be offered in order to motivate them to accept a given undesirable job, relative to other jobs that worker could perform.[1][2] One can also speak of the compensating differential for an especially desirable job, or one that provides special benefits, but in this case the differential would be negative: that is, a given worker would be willing to accept a lower wage for an especially desirable job, relative to other jobs.[3]
The idea of compensating differentials has been used to analyze issues such as the risk of future unemployment,[4] the risk of injury,[5] the risk of unsafe intercourse,[6] the monetary value workers place on their own lives,[7] and in explaining geographical wage differentials.[8][9][10][11]