Which theory is supportive of the idea that increasing educational levels for all workers would raise all workers' productivity and therefore their wages?
A)the theory of compensating differentials
B)the efficient-market hypothesis
C)human-capital theory
D)signaling theory

Question

Quizplus · Accepted Answer

Human-capital theory suggests that increasing the education level of workers increases their productivity and skills, which in turn raises their wages. Therefore, if all workers were to increase their educational levels, they would all become more productive and earn higher wages. The theory of compensating differentials suggests that workers are willing to accept lower wages in exchange for other benefits such as better working conditions or shorter commutes. The efficient-market hypothesis suggests that stock prices reflect all available information, while signaling theory suggests that education serves as a signal to potential employers about a worker's ability and work ethic. While these theories may also be relevant to understanding the labor market, they do not directly support the idea that increasing educational levels for all workers would raise their wages.

Which Theory Is Supportive of the Idea That Increasing Educational