Compensating differential

Wage differential is a term used in <a href="/facts/Labour_economics/RRlxNx0u">labour economics</a> to analyze the relation between the <a href="/facts/Wage_rate/3fS9dRMf">wage rate</a> and the unpleasantness, risk, or other undesirable attributes of a particular job. A compensating differential, which is also called a compensating wage differential or an equalizing difference, is defined as the additional amount of income that a given worker must be offered in order to motivate them to accept a given undesirable job, relative to other jobs that worker could perform. One can also speak of the compensating differential for an especially desirable job, or one that provides special benefits, but in this case the differential would be negative: that is, a given worker would be willing to accept a lower wage for an especially desirable job, relative to other jobs.
The idea of compensating differentials has been used to analyze issues such as the risk of future unemployment, the risk of injury, the risk of unsafe intercourse, the monetary value workers place on their own lives, and in explaining geographical wage differentials.

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Compensating differential