2. Suppose labor earnings for African-American and white workers are given as fo

Question

2. Suppose labor earnings for African-American and white workers are given as follows: NorthSouth African-Americans 30,000 20,000 Whites 50,000 50,000 Suppose half of white workers work in the North and half in the South. Compute the ratio of average earnings between African-Americans and whites for the country as a whole if: (a). 60 percent of African-American workers work in the South and 40 percent work in the North (b).40 percent of African-American workers work in the South and 60 percent work in the North

Explanation / Answer

Average earnings of Whites = 50% x 50,000 + 50% x 50,000 = 25,000 + 25,000 = 50,000

(a)

Average earnings of African-Americans = 60% x 20,000 + 40% x 30,000 = 12,000 + 12,000 = 24,000

Average earnings of African-Americans / Average earnings of Whites = 24,000 / 50,000 = 0.48

(b)

Average earnings of African-Americans = 40% x 20,000 + 60% x 30,000 = 8,000 + 18,000 = 26,000

Average earnings of African-Americans / Average earnings of Whites = 26,000 / 50,000 = 0.52

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