ABSTRACT
This chapter emphasizes the influence on job choice of such daily, recurring job characteristics as the work environment, the risk of injury, and the generosity of employee benefits. It focuses on how the labor market accommodates worker preferences. The chapter discusses the ways that differences in job characteristics influence individual choice and observable market outcomes. Most modern societies rely mainly on incentives, compensating wage differentials, to recruit labor to unpleasant jobs voluntarily. The chapter shows how a simple theory of job choice by individuals leads to the prediction that compensating wage differentials will be associated with various job characteristics. In 1970, Congress passed the Occupational Safety and Health Act, which directed the US Department of Labor to issue and enforce safety and health standards for all private employers. The chapter discusses that the theory of compensating wage differentials, which has become known as hedonic wage theory.
