How do wage differentials in labor markets reflect the concept of human capital investment?

Wage differentials in labor markets show how much workers earn based on their skills, education, and experience, which are all part of what we call human capital. When people invest in their education or training, they often become more skilled and valuable to employers, leading to higher wages. For example, a person who completes a college degree may earn more than someone who only has a high school diploma because they have more knowledge and skills that employers need. This difference in wages reflects the idea that investing in human capital can lead to better job opportunities and higher earnings. Overall, wage differentials highlight how education and training can improve a worker's ability to contribute to a company’s success and, in turn, maximize profits.