Wage rates in the United States cover a very wide range. In 2013, hundreds of thousands of workers received the legal federal minimum of $7.25 per hour. At the other extreme, the chief executives of several companies were paid more than $100 million, which works out to $20,000 per hour even if they worked 100-hour weeks. Even leaving out these extremes, there is a huge range of wage rates. Are people really that different in their marginal productivities?

A particular source of concern is the existence of systematic wage differences across gender and ethnicity. Figure 19-8 compares annual median earnings in 2013 of workers age 25 or older classified by gender and ethnicity. As a group, White males had the highest earnings. Other data show that women (averaging across all ethnicities) earned only about 72% as much; African-American workers (male and female combined), only 68% as much; Hispanic workers (again, male and female combined), only 57% as much.

We are a nation founded on the belief that all men are created equal—and if the Constitution were rewritten today, we would say that all people are created equal. So why do they receive such unequal pay? Let’s start with the marginal productivity explanations, then look at other influences.