Question 4 We know that monetary wage inequality has increased substantially ove

Question

Question 4 We know that monetary wage inequality has increased substantially over the last few decades. But what we really care about is total wage inequality (including fringes). How the omission of fringes affects the calculations of the evolution of wage inequality over time depends on whether the change in dispersion in the value of fringes across workers is positively or negatively correlated with the change in monetary wage inequality. For example, if the value of fringes for educated workers is growing relative to the value of fringes for less educated workers, then our standard measures of inequality are underestimating the true change in wage dispersion. If the opposite is true of course, then our standard measures are overestimating the change in wage dispersion.

Explanation / Answer

Total wage inequalities including fringes have increased overtime. Real disposable income of a person is calculated before adding the frienge benefits in the form of company car, housing assistance or food voucher. Information collection on these income is difficult. Due to several measurement issues, fringde benefits of the wealthier people often underreported. Non wage benefits such as fringe benefits are a kind of cost to the company. Ommission of this component from the calculation of evolution of wage inequality may underreport the wage inequality. Ommission of this term may not show the true value of inequality as the dispersion in wage distribution.

Related Questions

Navigate

• Browse (All)
• Browse Q
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.