Policymakers sometimes propose laws requiringfirms to give workers certain fringe benefits, such ashealth insurance or paid parental leave. Let’s considerthe effects of such a policy on the labor market.a. Suppose that a law required firms to give eachworker $3 of fringe benefits for every hour that theworker is employed by the firm. How does this lawaffect the marginal profit that a firm earns from eachworker at a given cash wage? How does the lawaffect the demand curve for labor? Draw your answeron a graph with the cash wage on the vertical axis.b. If there is no change in labor supply, how wouldthis law affect employment and wages?c. Why might the labor-supply curve shift inresponse to this law? Would this shift in laborsupply raise or lower the impact of the law onwages and employment?d. As discussed in Chapter 6, minimum-wage lawskeep the wages of some workers, particularlythe unskilled and inexperienced, above theequilibrium level. What effect would a fringebenefit mandate have for these workers?
Policymakers sometimes propose laws requiring
firms to give workers certain
health insurance or paid parental leave. Let’s consider
the effects of such a policy on the labor market.
a. Suppose that a law required firms to give each
worker $3 of fringe benefits for every hour that the
worker is employed by the firm. How does this law
affect the marginal profit that a firm earns from each
worker at a given cash wage? How does the law
affect the demand curve for labor? Draw your answer
on a graph with the cash wage on the vertical axis.
b. If there is no change in labor supply, how would
this law affect employment and wages?
c. Why might the labor-supply curve shift in
response to this law? Would this shift in labor
supply raise or lower the impact of the law on
wages and employment?
d. As discussed in Chapter 6, minimum-wage laws
keep the wages of some workers, particularly
the unskilled and inexperienced, above the
equilibrium level. What effect would a fringebenefit mandate have for these workers?
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