Paper 3 · June 2006 · labour markets and wage differentials
State the economic theory of wage differentials which holds that workers who invest more in their own education, training and skills earn higher wages as a result.
Model answer
human capital theory
Also accepted: human capital
Explanation
Human capital theory treats education and training as an investment that raises a worker's productivity, so workers with more human capital command higher wages in the labour market.
Derived from ZIMSEC Economics Paper 3, June 2006, Q5