assignment9.docx - Part I 2 a This would not have an effect...

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Part I. 2) a. This would not have an effect on the wage inequality since many of the wages will adjust to inflation and the inequality will remain same. However, if other wages adjust less than the minimum wage (the increase is less than the inflation), the inequality might decrease. b. This would increase the inequality since it pays more to the wealthy, making them even wealthier and increasing the gap. c. This would decrease the wage inequality since the increased subsidy is to be used for the increase in the wages of low-skill workers. 3) From 1970 to 2000, firms have started to use college education to determine the differences of skill between workers. This difference would be shown in wages as well. Rather than increasing the college graduates’ wages to show their higher skill, decreasing high school graduates’ wages is less costly since they both show an inequality of skill, and therefore wage. Because of this difference in wages, many workers-to-be wanted to pursue a college education, which explains the increase in the supply of college graduates.
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  • Spring '11
  • sarpca
  • Poverty

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