1. Suppose that the wage distribution for Riverside is given below: Sector Number of Workers Wage $10 (per hour) $5 А 40 B 30 C 30 $5 a. Compute the level of wage inequality for the town using the 90th / 10th percentile ratio and the 90th / 50th and 50th /10th ratios. (Yes, the computation is simple. Don't over-think it.) b. Assume a minimum wage law is passed that doesn't affect the market in the high- wage sector A but boosts wages to $7/hour in sector B, the covered sector, while reducing employment to 20 in that sector. Displaced workers in sector B move into the uncovered sector, C, where wages fall to $4.50 per hour as employment grows to 40. Has wage inequality risen or fallen? Does your answer change depending on the measure of wage inequality you use?
1. Suppose that the wage distribution for Riverside is given below: Sector Number of Workers Wage $10 (per hour) $5 А 40 B 30 C 30 $5 a. Compute the level of wage inequality for the town using the 90th / 10th percentile ratio and the 90th / 50th and 50th /10th ratios. (Yes, the computation is simple. Don't over-think it.) b. Assume a minimum wage law is passed that doesn't affect the market in the high- wage sector A but boosts wages to $7/hour in sector B, the covered sector, while reducing employment to 20 in that sector. Displaced workers in sector B move into the uncovered sector, C, where wages fall to $4.50 per hour as employment grows to 40. Has wage inequality risen or fallen? Does your answer change depending on the measure of wage inequality you use?
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter15: Poverty And Economic Inequality
Section: Chapter Questions
Problem 8SCQ: Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage...
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