Jake and Zach are identical twins who attended grammar school through college together. Jake took a job as an engineer who does not have to travel out of the state. Zach took a job as an engineer who must travel out of state once a week. Jake earns $125,000 a year, and Zach earns $155,000 a year. Select the best explanation for this wage difference.
A)Zach puts in less effort than Jake.
B)Zach has less human capital than Jake.
C)Zach receives a higher wage to compensate for the disagreeable nature of business travel.
D)Jake's lower salary supports the signaling theory of education.

Question

Quizplus · Accepted Answer

Zach's higher wage is likely to compensate for the inconvenience and stress of regular business travel, which may take time away from his personal life and cause long-term health effects. This is known as a compensating wage differential. It is not reasonable to infer that Zach puts in less effort or has less human capital than Jake, and there is no evidence to suggest that Jake's lower salary is a result of signaling theory.

Jake and Zach Are Identical Twins Who Attended Grammar School