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Suppose that the wage distribution for a small town is as given here Sector A B C Number of Workers 50 25 25 Wage ($) $10 per hour $5 per hour $5 per hour Assume that a minimum wage law is passed. It has no effect on the high wage sector A, but boosts wages to $7 per hour in sector B, while reducing employment to 20. Displaced workers from sector B move into the uncovered sector, C, where wages fall to $4.50 per hour. Has wage inequality risen or fallen? Explain, using three different ways to measure inequality.

Suppose that the wage distribution for a small town is as given here Sector A B C Number of Workers 50 25 25 Wage ($) $10 per hour $5 per hour $5 per hour Assume that a minimum wage law is passed. It has no effect on the high wage sector A, but boosts wages to $7 per hour in sector B, while reducing employment to 20. Displaced workers from sector B move into the uncovered sector, C, where wages fall to $4.50 per hour. Has wage inequality risen or fallen? Explain, using three different ways to measure inequality.

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose that the wage distribution for a small town is as given here Sector A B C Number of Workers 50 25 25 Wage ($) $10 per hour $5 per hour $5 per hour Assume that a minimum wage law is passed. It has no effect on the high wage sector A, but boosts wages to $7 per hour in sector B, while reducing employment to 20. Displaced workers from sector B move into the uncovered sector, C, where wages fall to $4.50 per hour. Has wage inequality risen or fallen? Explain, using three different ways to measure inequality.
Transcribed Image Text:Suppose that the wage distribution for a small town is as given here Sector A B C Number of Workers 50 25 25 Wage ($) $10 per hour $5 per hour $5 per hour Assume that a minimum wage law is passed. It has no effect on the high wage sector A, but boosts wages to $7 per hour in sector B, while reducing employment to 20. Displaced workers from sector B move into the uncovered sector, C, where wages fall to $4.50 per hour. Has wage inequality risen or fallen? Explain, using three different ways to measure inequality.
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