Chapter 12, Problem 1DQ

To determine

To calculate:

The average weekly earnings of employee A and employee B, and the earning gap between them to conclude about wage discrimination.

Explanation of Solution

Employee A:

Given,
Wage rate for first 40 hours of work is $20 per hour.
Overtime pay is $30 per hour.
Working hours are 36 hours per week.

The formula to calculate earnings for one week is,

$\text{Earning}\text{For}\text{One}\text{Week}=\left(\begin{array}{l}\text{Wage}\text{Rate}\times \\ \text{Working}\text{Hours}\end{array}\right)+\left(\begin{array}{l}\text{Overtime}\text{Wage}\text{Rate}\times \\ \text{Overtime}\text{Working}\text{Hours}\end{array}\right)$

Substitute $20 per houras wage rate, 36 hours of working hours, 0 hour for overtime working hours and $30 as overtime wage rate.

$\begin{array}{c}\text{Earning}\text{For}\text{One}\text{Week}=\left(\$20\text{per}\text{hour}\times 36\text{hours}\right)+\left(\$30\text{per}\text{hour}\times 0\text{}\text{hour}\right)\\ =\text{\$720}\end{array}$

Since there are four weeks in the month so, the monthly earning of employee A is $2,880 $\left(\$720\times 4\right)$.

The formula to calculate average weekly earnings is,

$\text{Average}\text{Weekly}\text{Earning}=\frac{\text{Monthly}\text{Earning}}{\text{Number}\text{of}\text{week}}$

Substitute $2,880 for monthly earning and 4 for number of weeks.

$\begin{array}{c}\text{Average}\text{Weekly}\text{Earning}=\frac{\$2,880}{4}\\ =\$720\end{array}$

Employee B:

Given,
Wage rate for first 40 hours of work is $20 per hour.
Overtime pay is $30 per hour.
Working hours are 42 hours per week.

The formula to calculate earnings for one week is,

$\text{Earning}\text{For}\text{One}\text{Week}=\left[\begin{array}{l}\left(\text{Wage}\text{Rate}\times \text{Working}\text{Hours}\right)\\ +\left(\text{Overtime}\text{Wage}\text{Rate}\times \text{Overtime}\text{Working}\text{Hours}\right)\end{array}\right]$

Substitute $20 per hour as wage rate, 40 hours as working hours, 2 hours for overtime working hours and $30 as overtime wage rate.

$\begin{array}{c}\text{Earning}\text{For}\text{One}\text{Week}=\$20\text{per}\text{hour}\times 40\text{hours}+\$30\text{per}\text{hour}\times 2\text{hours}\\ =\text{\$800}+\$60\\ =\$860\end{array}$

Since, there are four weeks in the month so, the monthly earning of employeeB is $\left(\$860\times 4\right)$ $3,440.

The formula to calculate average weekly earnings is,

$\text{Average}\text{Weekly}\text{Earning}=\frac{\text{Monthly}\text{Earning}}{\text{Number}\text{of}\text{week}}$

Substitute $2,880 for monthly earning and 4 for number of weeks.

$\begin{array}{c}\text{Average}\text{Weekly}\text{Earning}=\frac{\$3,440}{4}\\ =\$860\end{array}$

From the above calculation, it is clear that the average weekly earnings of B are more than that of A.

The formula to calculate earning gap is,

$\text{Earning}\text{Gap}=\text{Average}\text{Weekly}\text{Earning}\text{of}\text{B}-\text{Average}\text{Weekly}\text{Earning}\text{of}\text{A}$

Substitute $860 for average weekly earnings of B and $720 for average weekly earnings of A.

$\begin{array}{c}\text{Earning}\text{Gap}=\$860-\$720\\ =\$140\end{array}$

The formula to calculate percentage of earnings gap is,

$\text{Earning}\text{Gap}\text{Percentage}=\frac{\text{Earning}\text{Gap}}{\text{Average}\text{Weekly}\text{Earning}\text{of}\text{A}}\times 100$

Substitute $140 for earning gap and $720 for average weekly earnings of A.

$\begin{array}{c}\text{Earning}\text{Gap}\text{Percentage}=\frac{\$140}{\$720}\times 100\\ =19.4\%\end{array}$

From the above calculation,it is clear that the average weekly earnings of employee B is more than A by 19 %. The above earning gap is not due to discrimination but is rather due to the hard work of B. Both employee shave equal chances of earning more money. As B has worked for overtime, so, he has been awarded with more earnings.

Economics Concept Introduction

Concept introduction:

Earning gap:

Earning gap is the difference between the wages of two employees based on the earnings earned by them.
The formula to calculate earning gap is,

$\text{Earning}\text{Gap}=\text{Average}\text{Weekly}\text{Earning}\text{of}\text{One}-\text{Average}\text{Weekly}\text{Earning}\text{of}\text{Other}$

Wage Inequality:

Wage inequality is a discrimination of wages based on gender skills and many more factors. In the modern era, wage inequality is a practice followed in every part of the world and in every profession.