In 2010, many unskilled workers in the United States earned the Federal minimum
ID: 1209789 • Letter: I
Question
In 2010, many unskilled workers in the United States earned the Federal minimum wage of $7.25 per hour. By contrast, average earnings in 2010 were about $17.00 per hour, and certain highly skilled professionals, such as doctors and lawyers, earned $165.00 or more per hour. a. If we assume that wage differences are caused solely by differences in productivity, how many times more productive was the average worker than a worker being paid the Federal minimum wage? Instructions: Round your answer to two decimal places. times more productive than a minimum wage worker How many times more productive was a $165-per-hour lawyer compared to a worker earning minimum wage? Instructions: Round your answer to two decimal places. times more productive than a minimum wage worker b. Assume that there are 20 minimum-wage workers in the economy for each $165-per-hour lawyer. Also assume that both lawyers and minimum-wage workers work the same number of hours per week. If everyone works 40 hours per week, how much does a $165-per-hour lawyer earn a week? $ per week How much does a minimum-wage worker earn a week? $ per week c. Suppose that the government pairs each $165-per-hour lawyer with 20 nearby minimum-wage workers. If the government taxes 25 percent of each lawyer’s income each week and distributes it equally among the 20 minimum wage workers with whom each lawyer is paired, how much will each of those minimum-wage workers receive each week? $ each week If we divide by the number of hours worked each week, how much does each minimum-wage worker’s weekly transfer amount to on an hourly basis? Instructions: Round your answer to two decimal places. $ per hour d. What if instead the government taxed each lawyer 100 percent before dividing the money equally among the 20 minimum-wage workers with whom each lawyer is paired. How much per week will each minimum-wage worker receive? $ per week How much is that on an hourly basis? $ per hour
Explanation / Answer
ans
a)how many times more productive was the average worker than a worker being paid the Federal minimum wage
the average is more productive than minimum wage worker by= wages of average worker/ minimum wages=17/ 7.25
= 2.34
How many times more productive was a $165-per-hour lawyer compared to a worker earning minimum wage
the lawyer is more productive than minimum wage worker by= wage of lawyer/ minimum wage = 165/7.25 =22.76
b) If everyone works 40 hours per week, how much does a $165-per-hour lawyer earn a week
lawyer income per week = 40* 165 =$ 6600 per week
How much does a minimum-wage worker earn a week
minimum wage workers income per week = 7.25*40 = $290 per week
ans c) Suppose that the government pairs each $165-per-hour lawyer with 20 nearby minimum-wage workers. If the government taxes 25 percent of each lawyer’s income each week and distributes it equally among the 20 minimum wage workers with whom each lawyer is paired, how much will each of those minimum-wage workers receive each week
tax collected from lawyer = 25% of 6600 = 1650
this will be divided between 20 minimum wage workers
each of those minimum-wage workers will receive = 1650/20 = 82.5 per week
If we divide by the number of hours worked each week, how much does each minimum-wage worker’s weekly transfer amount to on an hourly basis
minimum-wage worker’s weekly transfer amount to on an hourly basis= 82.5/40 = $2.06 per hour
d)
if taxed 100%
than total collection of tax from one lawyer= 6600
each minimum-wage worker will receive= 6600/20 = 330 per week
on hourly basis = 330/40 = $8.25 per hour
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