Transfer earnings represent the minimum amount a worker must be paid in their current job to prevent them from moving to a different role. This amount is equivalent to the opportunity cost of the worker’s labour in their current position.

Key points:

• Transfer earnings represent what a worker could earn in their next best alternative job.
• These earnings are the baseline payment needed to keep a worker from quitting their current position.
• Workers who can easily find similar jobs elsewhere usually have low transfer earnings.
• Workers with rare or specialized skills that are highly valued in other areas have high transfer earnings.

For example, if a teacher earns 30,000 per year but could earn 28,000 in another job, their transfer earnings are 28,000. If their current employer pays them less than this amount, the teacher would likely leave.

In economics, transfer earnings are considered the supply price of labour, which is the minimum wage required to attract and keep workers in a specific occupation.