A college graduate who works at a firm is also working part-time on a master's degree in business and expects to be paid a higher wage after earning the degree. The basic reason for this wage differential is
A) efficiency wages.
B) compensating differences.
C) investment in human capital.
D) nonmonetary aspects of work.

Question

Quizplus · Accepted Answer

The wage differential between the college graduate's current wage and the expected higher wage after earning a master's degree is due to investment in human capital. Human capital refers to the skills, knowledge, and experience that a person possesses and can enhance through education and training. By obtaining a master's degree, the college graduate is increasing their human capital, which makes them more valuable to their employer and justifies the higher wage they expect to receive.

A College Graduate Who Works at a Firm Is Also