Policymakers sometimes propose laws requiring firms to give workerscertain fringe benefits, such as 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 fringebenefits for every hour that the worker is employed by the firm. Howdoes this law affect the marginal profit that a firm earns from eachworker at a given cash wage? How does the law affect the demand curvefor labor? Draw your answer on a graph with the cash wage on thevertical axis. b. If there is no change in labor supply how would this law affectemployment and wages? c. Why might the labor-supply curve shift in response to this law? Wouldthis shift in labor supply raise or lower the impact of the law on wagesand employment? d. As discussed in Chapter 6, the wages of some workers, particularly theunskilled and inexperienced, are kept above the equilibrium level byminimum wage laws. What effect would a fringe-benefit mandate havefor these workers?
Policymakers sometimes propose laws requiring firms to give workers
certain
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
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, the wages of some workers, particularly the
unskilled and inexperienced, are kept above the equilibrium level by
minimum wage laws. What effect would a fringe-benefit mandate have
for these workers?
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