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Some employers pay differentials for other things, too ... not just for evening shifts and night shifts. My employer also pays a differential for hours worked on the weekend and also for being the Charge Nurse or for being a preceptor.
Employers use differentials to reward nurses for either working an otherwise unpopular shift and/or for taking on extra responsibilities. And as RN2B07 said, they can really add up. It's important to take such things into consideration as you are looking for jobs and comparing one compensation to another. One employer may offer a higher base salary, but very small differentials. The other employer may have a slightly lower base salary, but actually pay more because of the higher differentials.
If the differential is only $1 per hour (which is very low) and you work the average of 2080 hours per year, then you have earned an extra $2080. I earned about $500/month extra by working nights when I was a staff nurse.