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Figure 4-9 in the Borjas textbook discusses the changes to a labor market equilibrium when the government mandates an employee benet for which the cost
Figure 4-9 in the Borjas textbook discusses the changes to a labor market equilibrium when the government mandates an employee benet for which the cost exceeds the worker's valuation (panel a) and for which the cost equals the worker's valuation (panel b). Now consider a new case where the cost of the benet (C) is less than the worker's valuation (B). A) Provide a similar graph to those in Figure 4-9, and discuss how the equilibrium level of employment and wages would change. B) Are workers better off or worse off than before? What happens to total compensation, i.e. pecuniary benets (wages) and non-pecuniary benets? C) What about rms? What happens to total cost of hiring labor? EI E' 150 Employment E Employment (3)0151 of Mandate Exceeds Worker's Valuation (b) Cost of Mandate Equals Worker's Valuation
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