The Wage Structure

# The Wage Structure - wage ratio equals 1.75 we have that...

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Chapter 08 - The Wage Structure 8-3. From 1970 to 2000, the supply of college graduates to the labor market increased dramatically, while the supply of high school (no college) graduates shrunk. At the same time, the average real wage of college graduates stayed relatively stable, while the average real wage of high school graduates fell. How can these wage patterns be explained? Looking at the labor supply and labor demand of high school and college graduates, one can see immediately that for the average high school wage to fall, labor demand for high school graduates must have shifted in. Likewise, for the average wage of college graduates to stay the same, labor demand for college graduates must have shifted out. 8-4. Suppose the 10 th and 50 th percentile wages are \$23,500 and \$37,600 respectively. Further, the 90-50 wage ratio is 1.75. What is the 90 th percentile wage, and what are the 90- 10 and 50-10 wage ratios? The two wages imply that the 50-10 wage ratio = \$37,600 / \$23,500 = 1.60. Further, as the 90-50

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Unformatted text preview: wage ratio equals 1.75, we have that 1.75 = w 90 / w 50 = w 90 / \$37,600 => w 90 = \$65,800. 42 Labor Market for High School Graduates L D 1970 L S 2000 L S 1970 L D 2000 L 1970 L 2000 w 1970 w 2000 Labor Market for College Graduates L D 1970 L S 2000 L S 1970 L D 2000 L 1970 L 2000 w 1970 = w 2000 Chapter 08 - The Wage Structure Finally, we can calculate the 90-10 wage ratio as w 90 / w 10 = \$65,800 / \$23,500 = 2.80. 8-6. Calculate the Gini coefficient for the distribution of household income reported in Table 8-2. The area under each part of the Lorenz curve is: (½)(.2)(.035) = .0035, (.2)(.035)+ (½)(.2)(.122–.035) = .0157, (.2)(.122)+ (½)(.2)(.268–.122) = .0390, (.2)(.268)+ (½)(.2)(.498–.268) = .0766, (.2)(.498)+ (½)(.2)(1.00–.498) = .1498. The Gini coefficient, therefore, is [ .5 – .2846 ] / .5 = .4378. 43...
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## This note was uploaded on 11/20/2010 for the course ECONOMICS 331 taught by Professor Mj during the Fall '10 term at University of Alberta.

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The Wage Structure - wage ratio equals 1.75 we have that...

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