Suppose that Congress passes a law requiringemployers to provide employees some benefit (suchas healthcare) that raises the cost of an employee by$4 per hour.a. What effect does this employer mandate haveon the demand for labor? (In answering this andthe following questions, be quantitative whenyou can.)b. If employees place a value on this benefit exactlyequal to its cost, what effect does this employermandate have on the supply of labor?c. If the wage can freely adjust to balance supply anddemand, how does this law affect the wage andthe level of employment? Are employers better orworse off? Are employees better or worse off?d. Suppose that, before the mandate, the wage in thismarket was $3 above the minimum wage. In thiscase, how does the employer mandate affect thewage, the level of employment, and the level ofunemployment?e. Now suppose that workers do not value themandated benefit at all. How does this alternativeassumption change your answers to parts(b) and (c)?
Suppose that Congress passes a law requiring
employers to provide employees some benefit (such
as healthcare) that raises the cost of an employee by
$4 per hour.
a. What effect does this employer mandate have
on the
the following questions, be quantitative when
you can.)
b. If employees place a value on this benefit exactly
equal to its cost, what effect does this employer
mandate have on the supply of labor?
c. If the wage can freely adjust to balance supply and
demand, how does this law affect the wage and
the level of employment? Are employers better or
worse off? Are employees better or worse off?
d. Suppose that, before the mandate, the wage in this
market was $3 above the minimum wage. In this
case, how does the employer mandate affect the
wage, the level of employment, and the level of
unemployment?
e. Now suppose that workers do not value the
mandated benefit at all. How does this alternative
assumption change your answers to parts
(b) and (c)?
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