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Economics glossary · Work and what it pays

Compensating differential

What compensating differential means in economics, as one of causes of pay differences between jobs, with an example and a question to test yourself.

Definition
Compensating differential
A compensating differential is the extra pay a job must offer to attract enough workers because it is dangerous, unpleasant or at unsociable hours.
Example

Can you think of an example of compensating differential?

Test yourself

Can you name three causes of pay differences between jobs?

Learn it properly: the module

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