Nick and Daryn are both market analysts who started working for their current employer during the same year,graduated from the same university with bachelors' degrees in economics,and achieved similar performance reviews.Nick earned a master's degree last year.If Nick earns a higher annual salary than Daryn because he has more formal education,the employer is
A) paying a compensating differential.
B) paying efficiency wages.
C) practicing discrimination.
D) rewarding increases in human capital.

Question

Quizplus · Accepted Answer

Nick's higher education level is an increase in his human capital, which makes him a more productive worker. As a result, if he earns a higher salary than Daryn, this is a reward for his increased human capital. It is not discrimination, as both workers have similar backgrounds and performance reviews, nor is it efficiency wages, which typically involve paying higher wages to motivate workers to be more productive. It is also not a compensating differential, which would involve paying a higher wage to compensate for an undesirable aspect of the job (such as risk or unpleasant working conditions).

Nick and Daryn Are Both Market Analysts Who Started Working