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Chapter 17: Problem 3

Over time, the gap between the wages of workers with college degrees and the wages of workers without college degrees has been increasing. Shouldn't this gap have raised the incentive for workers to earn college degrees, thereby increasing the supply of college-educated workers and reducing the size of the gap?

Short Answer

Expert verified
The increasing gap in wages does provide an incentive for workers to get college degrees. However, other factors such as cost, time and personal preferences also influence this decision. If enough people do pursue degrees, the supply of degree-holders would increase and could potentially reduce the wage gap. Equally, the demand side must be considered since an increase in supply may not necessarily lead to a decrease in the gap if demand also increases.

Step by step solution

01

Understanding the wage gap

The wage gap between college-educated and non-college-educated workers is increasing. This suggests that the demand for college-educated workers is greater than the supply, leading to higher wages for degree-holders.
02

Discussing the incentive to earn degrees

While it can be thought that the wage gap would incentivize more workers to earn college degrees, it's important to consider other factors that could affect this decision. The cost of education, the time necessary to complete it and the individual's personal circumstances and preferences could play significants roles.
03

Discussing the supply of college-educated workers

If more workers decided to earn college degrees as a result of the wage gap, then theoretically the supply of college-educated workers would increase. This could lead to a reduction in the wage gap, but it would depend heavily on the demand side – the need for college-educated workers in the job market.
04

Discussing circulatory effects

It's important to note that if there was a huge influx of college-educated workers, this could potentially reduce the wage gap by saturating the market and decreasing the value of a degree. However, this effect would not automatically eliminate the wage gap, especially if demand for degree-holders also increased.

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