Unformatted text preview: 9. (10 pts) Describe an earned-income tax credit for workers (and a tax on employers that would raise enough money to pay for it) that would make both workers and employers better off than under the minimum wage. Answer : The government would have to offer a tax credit worth at least $1.40/hr for each of the 100,000 person-hours of employment to match the additional $140,000/day of worker surplus. Because employer surplus is $180,000/day lower under the minimum wage than under the earned-income tax credit, employers would be willing to pay a tax up $180,000 to avoid the reduction in their surplus due to the minimum wage, an amount sufficient to finance the earned-income tax credit required and make workers and employers better off....
View Full Document
- Spring '08
- Supply And Demand, tax credit