Economics of Public Issues (20th Edition) (The Pearson Series in Economics)
Economics of Public Issues (20th Edition) (The Pearson Series in Economics)
20th Edition
ISBN: 9780134531984
Author: Roger LeRoy Miller, Daniel K. Benjamin, Douglass C. North
Publisher: PEARSON
Question
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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.

Expert Solution & Answer
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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,

    EarningForOneWeek=( WageRate× WorkingHours )+( OvertimeWageRate× OvertimeWorkingHours )

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

    EarningForOneWeek=( $20perhour×36hours )+( $30perhour×0hour ) =$720

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

The formula to calculate average weekly earnings is,

    AverageWeeklyEarning= MonthlyEarning Numberofweek

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

    AverageWeeklyEarning= $2,880 4 =$720

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,

    EarningForOneWeek=[ ( WageRate×WorkingHours ) +( OvertimeWageRate×OvertimeWorkingHours ) ]

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

    EarningForOneWeek=$20perhour×40hours+$30perhour×2hours =$800+$60 =$860

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

The formula to calculate average weekly earnings is,

    AverageWeeklyEarning= MonthlyEarning Numberofweek

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

    AverageWeeklyEarning= $3,440 4 =$860

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,

    EarningGap=AverageWeeklyEarningofBAverageWeeklyEarningofA

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

    EarningGap=$860$720 =$140

The formula to calculate percentage of earnings gap is,

    EarningGapPercentage= EarningGap AverageWeeklyEarningofA ×100

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

    EarningGapPercentage= $140 $720 ×100 =19.4%

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,

    EarningGap=AverageWeeklyEarningofOneAverageWeeklyEarningofOther

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.

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Chapter 12 Solutions

Economics of Public Issues (20th Edition) (The Pearson Series in Economics)

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