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The article presents a discussion on inequality in human capital development in the U.S. Lawrence Katz suggests that a rise in inequality is not due to a poor population, but by poor people who becomes better at a slower pace than rich people. Lawrence Summers also doubted about the idea that the problems in corporate governance are leading to executives being paid more than the market value. A substantial amount of hedge fund managers' compensation is invested in fund and was recorded as labor income on a deferred basis when the investment is sold.

The article presents an argument on some historical causes of the growth in wage inequality in the U.S. According to Frank Levy, the interaction of existing labor market institutions and rapid cost-of-living increases in the 1970s has led to a bump in labor's share of income. The deregulation that occurred during 1970 and 1980 has forced the labor share in the opposite direction by amplifying the impact of other market and technological changes. It has also been suggested that young people should acquire more education in order to raise their lifetime earnings. The lack of decline in the high school wage premium suggests that immigrants have not pushed down wages for less educated native-born workers.

The last few years have seen the publication of several research papers on "efficiency wage" models of unemployment. The chief advantage of this approach seems to be its prediction that "genuine involuntary unemployment" can exist in a labor market with no artificial constraints on wage flexibility, and where all agents are rational income or utility of income maximizers. The result depends on the existence of a positive relationship of sufficient strength between the productivity of a worker and the wage he is paid. With this assumption the firm's profit-maximizing wage will be independent of labor supply conditions, and unemployed workers will find employers unwilling to hire them even if they offer to work at lower wages. One of the major objections to the versions of this model in which higher wages reduce the worker's incentives to shirk, or to quit, is the fact that unemployed workers should offer to pay "entrance fees" or bonds to work at these firms. Since the entrance fee is a sunk cost once the worker actually starts his job, it will not affect his incentives to work hard or quit prematurely. The entrance fee will reduce the expected value of the firm's offer down to that of the alternative, and the involuntary nature of the unemployment disappears.

Excerpts the publication `Recent Developments in the Theory of Involuntary Unemployment,' by Carl Davidson. Focuses on a market-based solution to the problem of shirking employees.

The article reports on the efforts of the schools in Chicago, Illinois on the promotion of their teachers on the basis of efficiency. It has been that the length of service is the basis of salary increase for most schools of which time is the only recognized qualification in the increased value of a teacher. Yet, the board of education of Chicago has been planning for a promotion that would allow all aspiring teachers for a fair deal.