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Stuti Agrawal
on Nov 16, 2024

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Gerald earns a higher salary than his brother Peter because Gerald went to law school and is a lawyer, whereas Peter dropped out of college to work as a mechanic. The difference in salary illustrates a compensating differential.

Compensating Differential

The difference in wages that arises between jobs with differing levels of risk, convenience, or other non-monetary characteristics, compensating for the less desirable aspects of certain jobs.

Law School

An institution specializing in legal education to prepare students for careers in law.

  • Understand the function of compensating differentials within the labor market.
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Emily HawksNov 18, 2024
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