The supply of labour depends on various factors such as:
- Wages
- Qualifications required
- Non monetary benefits / costs
The compensating wage differential depends on how much income is necessary to compensate for unpleasant working environment.
For example, 2 jobs may have same skill requirement. But, one being a toilet cleaner may require a higher wage to attract enough people to supply their labour for that job compared with being a gardeners.
Compensating wage differentials may also be necessary for dangerous jobs.