econ151a_ps8ak

# econ151a_ps8ak - Answers to Problem Set 8 Econ 151a Winter...

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Answers to Problem Set 8 Econ 151a Winter 2010 1. A. The number of uninsured workers at risk of unemployment (those earning less than the minimum wage plus the cost of employer-paid health insurance: The MW is \$7.25 Health insurance costs \$4.80/hour, and employers must pay 85% of this cost, so the compensation increase to employers is .85*4.80 = 4.08, or approximately \$4.00. We need to know how many uninsured workers are within \$4 of the minimum wage, or how many earn less than \$11.25. From the question, the fraction earning less than \$11.25 is 33% + 11% + 6% + 5% = 55%. The number of uninsured, at risk workers is given by .55 X .17 X 108Million = 10 Million workers B. The percent change in employment (or the fraction who go from employed to not employed) is equal to the change in compensation that will result from the mandate (45%) multiplied by the minimum wage elasticity (-.07) -.07 X .45 = .03, or 3 %. So, 3% of at risk workers gives us .03 X 10 Million, or 300,000 workers.

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## This note was uploaded on 02/14/2011 for the course ECON 151A taught by Professor Miller during the Spring '06 term at UC Davis.

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econ151a_ps8ak - Answers to Problem Set 8 Econ 151a Winter...

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