EX 11: Based on the accompanying labor-market diagram, if the minimum wage is increased from $12 to $14 per hour, the number of unemployed workers will workers. by per hour $14 $12 $10 60 80 100 120 140 Number of workers employed Labor Supply Labor Demand
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- Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table from question 1 to account for this change in policy. Draw Jonathans labor-leisure opportunity sets, both for before this welfare program is enacted and after it is enacted.A government passes a family-friendly law that no companies can have evening, nighttime, or weekend hours, so that everyone can be home with their families during these times. Analyze the effect of this law using a demand and supply diagram for the labor market: first assuming that wages are flexible, and then assuming that wages are sticky downward.Imagine that the government statisticians who calculate the inflation rate have been updating the basic basket of goods once every 10 years, but now they decide to update it every five years. How will this Change affect the amount of substitution bias and quality/new goods bias?
- In a country called Uncle Sam Land (USL), the labor demand curve is given by:W = K- 4LWhere W is the wage rate, K is a variabledetermined by accumulated capital stock in thecountry, and L is the labor force in the country.K= 50 is supplied by the capitalists.If the labor force in this country goes up from 10 to 11, what happens to the national income in USL?National Income = income of all workers + income of all capitalists.Select one:a. Does not changeb. Goes down by 44c. Goes up by 8d. Goes up by 26e. None of the above.Consider an economy with two labor markets—onefor manufacturing workers and one for serviceworkers. Suppose initially that neither is unionized.a. If manufacturing workers formed a union, whatwould you expect to happen to the wages andemployment in manufacturing?b. How would these changes in the manufacturinglabor market affect the supply of labor in themarket for service workers? What would happento the equilibrium wage and employment in thislabor market?Structural unemployment is sometimes said toresult from a mismatch between the job skills thatemployers want and the job skills that workers have.To explore this idea, consider an economy withtwo industries: auto manufacturing and aircraftmanufacturing.a. If workers in these two industries requiresimilar amounts of training, and if workers atthe beginning of their careers can choose whichindustry to train for, what would you expect tohappen to the wages in these two industries? Howlong would this process take? Explain.b. Suppose that one day the economy opens itselfto international trade and, as a result, startsimporting autos and exporting aircraft. Whatwould happen to the demand for labor in thesetwo industries?c. Suppose that workers in one industry cannot bequickly retrained for the other. How would theseshifts in demand affect equilibrium wages both inthe short run and in the long run?d. If for some reason wages fail to adjust to the newequilibrium levels, what would occur?
- The United States has established a progressive income tax system, where a worker’s tax rate onearnings increases as she earns more money. There are 168 hours in a given week. Assume thatfor the first 56 hours worked, the tax rate is t1, which means that the net real wage is w*(1-t1).After working the 56th hour, the worker jumps to a higher tax rate t2. After the 112th hourworked, the individual jumps to an even higher tax rate, t3.(a) During most election years, some politicians argue that a having a flat tax system isbetter. Assume that there is a proposal to institute a flat tax, where all workers pay a taxrate equal to t4, which is greater than t3. On the same set of axes, graph the budgetconstraints associated with the progressive tax system and the flat tax system. Make sureto label all of the slopes.(b) Would moving to this proposed flat tax system likely encourage more or fewer hoursworked for relatively high-wage workers? Make sure to explain your answer (a writtenexplanation…Suppose that Congress passes a law requiringemployers to provide employees some benefit (suchas healthcare) that raises the cost of an employee by$4 per hour.a. What effect does this employer mandate haveon the demand for labor? (In answering this andthe following questions, be quantitative whenyou can.)b. If employees place a value on this benefit exactlyequal to its cost, what effect does this employermandate have on the supply of labor?c. If the wage can freely adjust to balance supply anddemand, how does this law affect the wage andthe level of employment? Are employers better orworse off? Are employees better or worse off?d. Suppose that, before the mandate, the wage in thismarket was $3 above the minimum wage. In thiscase, how does the employer mandate affect thewage, the level of employment, and the level ofunemployment?e. Now suppose that workers do not value themandated benefit at all. How does this alternativeassumption change your answers to parts(b) and (c)?(a) Solve for the equilibrium wage and employment level.(b) Graph the demand and supply curves.(c) At this equilibrium, what is your welfare/gains from trade?(d) Now, assume a minimum wage has been implemented at $20. How will this impact yourdemand? Supply?(e) How many workers are displaced by this new policy? How much “extra” unemployment occurswith this new policy? Hint: Think about the reservation wage.(f) Graph the new labor demand and supply with this minimum wage.(g) At this equilibrium, what is your new welfare? Are you better off with this change? Explain.
- The Environmental Protection Agency (EPA) wants to investigate the value workers place on being able to work in “clean” mines over “dirty” mines. The EPA conductsa study and finds the average annual wage in clean mines to be $42,250 and the average annual wage in dirty mines to be $47,250.a. According to the EPA, how much does the average worker value working in a clean mine?b. Suppose the EPA could mandate that all dirty mines become clean mines and that all workers who were in a dirty mine must therefore accept a $5,000 pay decrease. Are these workers helped by the intervention, hurt by the intervention, or i ndifferent to the intervention?A dozen eggs cost $0.88 in January 1980 and $2.11in January 2015. The average wage for productionworkers was $7.58 per hour in January 1980 and$19.64 in January 2015.a. By what percentage did the price of eggs rise?b. By what percentage did the wage rise?c. In each year, how many minutes did a workerhave to work to earn enough to buy adozen eggs?d. Did workers’ purchasing power in terms of eggsrise or fall?1. Describe with the use of diagam how the wage rate and level of employment are determined if the labor market is purely competitive