Raw Labor: Homogeneous or Heterogeneous?

Abstract

According to the human capital theory, each worker´s earnings consist of two additive components: raw labor and human capital. Raw labor refers to the initial earnings capacity of each individual before the acquisition of any human capital. Human capital is the result of education and labor experience. Other factors which affect earnings are gender, experience, responsibility within the firm´s hierarchy and size of the firm. A type of Mincer earnings function is used in the estimations of the WageIndicator salary checker. Most of the analyses on the Mincer earnings equation have dealt with the values of the slopes but little attention has been paid to the intercept values. The value of the intercept is related to the initial earnings capacity. This capacity is given by innate ability. In the literature it is usually assumed that individual-specific differences affect the intercept. So, in principle it should be expected to find also differences in the estimates of the intercept among different occupations. Using data from Argentina, Brazil and U.K., tests were carried out in order to verify if the estimates of the intercepts for the different occupations in each country did or did not differ significantly. In the great majority of cases the intercepts do not differ significantly. So, the results obtained favor the hypothesis of homogeneous innate abilities.