Discussion:
Consider a person who can work up to 80 hours each week at a pre-tax wage of $20 per hour but faces a constant 20% payroll tax. Under these conditions, the worker maximizes her utility by choosing to work 50 hours each week. The government proposes a negative income tax whereby everyone is given $300 each week and anyone can supplement her income further by working. To pay for the negative income tax, the payroll tax rate will be increased to 50%.
(a) On a single graph, draw the workers original weekly budget line and her budget line under the negative income tax.
(b) Show that the worker will choose to work fewer hours if the negative income tax is adopted. (c) Will the workers utility be greater under the negative income tax?
https://www.citylab.com/work/2015/02/where-have-all-the-construction-workers-gone/385481/ Answer the following questions based on reading the above article:
(a) Where HAVE all the construction workers gone? There are several explanations provided in the article.
(b) What government programs exist that help people get new jobs? Are there programs that might actually hinder this process?
(c) Given there is a shortage of construction workers currently, does this article support or challenge the traditional model of labor supply?