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In 2010, many unskilled workers in the United States earned the federal minimum

ID: 1246670 • 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 $22 per hour, and certain highly skilled professionals, such as doctors and lawyers, earned $100 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? How many times more productive was a $100-per-hour lawyer compared to a worker earning minimum wage? b. Assume that there are 20 minimum-wage workers in the economy for each $100-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 $100-per-hour lawyer earn a week? How much does a minimum-wage worker earn a week? c. Suppose that the government pairs each $100-per-hour lawyer with 20 nearby minimum-wage workers. If the government taxes 25 percent of each lawyer

Explanation / Answer


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