Correct Answer: The difference in wages between skilled and unskilled workers

Solution : The correct answer is (a) The difference in wages between skilled and unskilled workers.

The skill premium is the additional wage or earnings that individuals with higher levels of skills and qualifications receive compared to those with lower levels of skills or qualifications. It represents the economic reward or premium that is associated with possessing valuable and in-demand skills in the labor market.

In general, individuals who possess higher levels of education, training, and specialized skills tend to earn higher wages than those with lower levels of skills. The skill premium reflects the higher productivity and value that skilled workers bring to employers, resulting in higher compensation.

The skill premium can vary across industries, occupations, and countries, depending on factors such as supply and demand dynamics, the level of skill required for specific jobs, technological advancements, and labor market conditions.