Workers earn different wages for many reasons, including compensating differentials for job attributes, human capital levels, and natural ability. The return to accumulating human capital through education has increased wages significantly over the past decade. Unexplained variations in earnings are largely due to ability, effort, and chance. Some economists argue that education serves as a signal of ability to employers. Wages are sometimes above equilibrium levels due to minimum wages, unions, and efficiency wages. Differences in earnings also stem from discrimination by race, sex and other factors, though measuring discrimination requires accounting for human capital and job characteristics. Competitive markets tend to limit discrimination's impact, but it can persist if customers prefer discrimination or if required by law.

1. 19 Earnings and Discrimination

8. Table 1 Average Annual Earnings by Educational Attainment Copyright©2004 South-Western

22. Table 2 Median Annual Earnings by Race and Sex Copyright©2004 South-Western