Wednesday 23 March 2016

What makes people get paid differently?

It is interesting for me to study what makes people's incomes different and how incomes vary across different jobs. I think there are several elements/variables that have effects on people's incomes: education, working hours, working conditions, experience, family background and risk. Education, working hours, working conditions, experience and family background are easy to understand their effects on incomes and easy to measure or rank. However, different jobs have different degrees of risk, such as job security. Risk is very difficult to measure and sometimes people cannot precisely tell how much risk they face. Risk is exogenous as well as endogenous and changes overtime. Moreover, it is reasonable to assume people who carry greater risk receive higher incomes but from data some people could receive much lower incomes when they are suffering from the negative sides of their risk. To study the correlation and influences of these variables, we could probably have some ideas which one plays the largest role in widening the income gap. Moreover, we can compare different jobs and see which jobs have better payment and lower cost (working hours, working condition and etc).

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