8 terms

Personnel Economics

Final Study Terms
The longer you work are you more or less likely to get an MBA?
Assuming stream of income with an MBA is always greater than the stream of income without it, the longer you work after graduation and before retirement, the more likely you should get an MBA. The longer you can accrue benefits the more the total benefit will be.
How does a rising interest rate impact your decision to get an MBA?
As the interest rate increases you are less likely to get an MBA. This is because when calculating NPV for the return of the MBA, the return becomes less and less as the interest rate increases.
Why might actual return to education be more or less than the difference between two amounts of pay?
- The return to education might be smaller if the people who get their MBA would earn more than a certain amount without an MBA.
- These people could be very business-savvy and driven, and could earn more than other college graduates even without an MBA.
- It could appear that an MBA is increasing their income by more than it actually is.

- If the population medians are focused solely on salary and ignore benefits, perks and stock options.
- MBAs are more likely to be had by corporate executives who earn a lot in benefits and stock options, which means total compensation is actually higher.
Why do unions have such little impact on increasing the wage rate?
1. The Labor Demand Curve is very elastic, unions worry about pushing for an increase in wages which would lead to a large decrease in employment

2. The industry might be in decline or not experiencing rapid growth.
Fall and Rise of Top Income in the United States
- Decrease in total capital incomes took place during the War, and Great Depression

- Due to large increases in wages, especially executive compensation
- Impediments to free markets due to labor market regulations, unions, social norms regarding pay inequality - valuable efficiency gains
- Increased ability for top executives to set own pay
Fall and Rise of Top Income in Europe and Japan
- Did not develop a progressive taxation system (Europe)
- Impediments to free markets due to labor market regulations, unions, and social norms regarding pay inequality still exist in Europe and Japan
- US has grown much faster that Europe and Japan in terms of growth and inequality.
Why is Raw Earnings Gap not a good measure of discrimination?
Raw Earnings Gap - Comparing median earnings of a woman with the median earnings of men.

- Different skills and comfort in bargaining for pay
- More women could have less demanding or not full time jobs to stay at home and take care of children
- Differences in job titles are not getting picked up in data
What evidence suggests discrimination is a factor in hiring decisions?
1. Personal prejudice (by employer)

2. Personal prejudice (by customers)

3. Statistical discrimination (whites will be called back for a second interview more often than blacks)