A compensating differential is a difference in wages due to higher levels of education or other forms of human capital.

Compensating Differential

Additional pay or benefits provided to employees to offset unpleasant aspects of a job.

Human Capital

Expertise, knowledge, and learned experiences of an individual or demographic, evaluated based on their monetary significance or cost to an entity or nation.

Education

The process of facilitating learning, or the acquisition of knowledge, skills, values, beliefs, and habits through various forms of instruction or training.