In 2012, many unskilled workers in the United States earned the federal minimum

Question

In 2012, many unskilled workers in the United States earned the federal minimum wage of $7.25 per hour. By contrast, average earnings in 2012 were about $23.00 per hour, and certain highly skilled professionals, such as doctors and lawyers, earned $105.00 or more per hour. Instructions: In parts a, c, and d, round your answers to 2 decimal places. In part b, enter your answers as whole numbers. 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? How many times more productive was a $105-per-hour lawyer compared to a worker earning minimum wage? b. Assume that there are 20 minimum-wage workers in the economy for each $105-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 $105-per-hour lawyer earn a week?$ per week. How much does a minimum-wage worker earn a week?$ per week. c. Suppose that the government pairs each $105-per-hour lawyer with 20 nearby minimum-wage workers. If the government taxes 25 percent of each lawyer’s income each week and distributes it equally among the 20 minimum-wage workers with whom each lawyer is paired, how much will each of those minimum-wage workers receive each week?$ 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?$ 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

a) Given that the earning of minimum wage workers is $7.25 per hour, the earning of an average worker is $23 per hour and the earning of a lawyer is $105 per hour.

Since wage differences are caused solely by differences in productivity, the wage differential between an average worker and a worker being paid the federal minimum wage suggests that an average worker is three times, approximately 3.17 times more productive.

Similarly, a $105-per-hour lawyer is 14.48 or approximately 15 times more productive compared to a worker earning minimum wage

b) Now that there are 20 minimum-wage workers in the economy earning $7.25 per hour for each $105-per-hour lawyer. Everyone works 40 hours per week.

So a $105-per-hour lawyer earn $4200 a week by working 40 hours per week. A minimum-wage worker would earn $290 per week by working 40 hours per week.

c) The government pairs each $105-per-hour lawyer with 20 nearby minimum-wage workers and taxes 25 percent of each lawyer’s income each week (which is equal to $1050) and distributes it equally among the 20 minimum-wage workers (so that each receives $52.50 as a share by dividing 25% of 4200 or $1050 with 20). Then each of those minimum-wage workers will receive $290 on their own by working and $52.50 as a grant, to make a total of $342.50 each week.

If we divide by the number of hours worked each week, each minimum-wage worker’s weekly transfer amounts to $1.31 per hour ($51.25/40).

d) 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 then each worker will receive 4200/20 or $210 per week and $5.25 per hour on hourly basis.

Related Questions

Navigate

• Browse (All)
• Browse I
• Subjects

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