Economics Question

The University of Texas at Austin LBJ School of Public Affairs 2. Wage policies In several industrialized countries, the wages of low-skilled workers have fallen in recent years. In one country, two broad proposals have been put forth to improve low-skilled workers' pay: a minimum wage, and a wage subsidy. Employers' demand for low-skilled workers (in millions of worker-hours) is: QD =100~5w0 where wn is the wage paid by employers in dollars per hour. The supply of low~skilled labor (in millions of worker-hours) is: Q =30+2w5 where W5: is the wage received by workers in dollars per hour. (a) What is the market wage and level of employment among lowskilled workers in this country, with no government intervention? (b) The proposed minimum wage plan would set the wage at $1 S/hour. Opponents claim that the policy will induce unemployment. Unemployment is dened by hours that workers are willing to provide at a given wage, but rms will not want to purchase. i. How much unemployment (in worker-hours) will be induced, if any, as a result of the $15/hour minimum wage? ii. What is the gain in producer (workers') surplus for those still employed? (0) Under the competing proposal, the wage subsidy plan, the government will provide a $7/h0ur subsidy to employers who hire low-skilled workers. i. What would be the new wage received by workers under the subsidy plan? ii. What wage will employers pay? iii. What will be the induced unemployment, if any, in worker-hours? iv. What will be the cost to government