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Chapter 12: Problem 7

How would each of the following, ceteris paribus, affect the college wage premium over a long period of time? a. Government scholarships are sharply curtailed. b. Weird solar radiation renders all computers in the world inoperable. c. Computers become even more complicated to operate.

Short Answer

Expert verified
a. Curtailing government scholarships would likely increase the college wage premium. b. Rendering all computers inoperable will likely decrease the college wage premium. c. An increase in computer complexity would likely increase the college wage premium.

Step by step solution

01

Effects of Curtailing Government Scholarships

When government scholarships are sharply curtailed, fewer people can afford to go to college, reducing the supply of college-educated workers. When the supply of something decreases (keeping demand stable), it becomes more valuable. Thus, it is expected that this situation would lead to an increase in the college wage premium over a long period of time.
02

Effects of Inoperable Computers due to Solar Radiation

If an odd solar radiation event rendered all computers inoperable, it would drastically decrease the need for computer-oriented jobs where a college degree is often necessary. A decrease in demand for these been jobs would mean a potential decrease in the college wage premium. In addition, other fields such as manual labour or craftsmanship may see an increase in demand, further lowering the wage premium. There would be a consensus that this situation would decrease the college wage premium over the long term.
03

Effects of Increasing Complexity of Computers

If computers become more complicated to operate, the demand for those with an advanced education or college degree, who are presumably more equipped to handle the complexity, would increase. Keeping supply of educated workers constant while increasing demand would lead to an increase in value, thus, this situation would likely result in a long-term increase in the college wage premium.

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Most popular questions from this chapter

Suppose that in the market for U.S. meat packers, two things happen simultaneously: (1) Due to growth in less-developed countries, the demand for U.S. meat exports rises; and (2) Due to other job opportunities, fewer people find meat-packing an attractive job. a. Which curve or curves in the labor market for meat packers would be affected by these changes? b. If there were no other changes, could you predict the impact of these events on the equilibrium wage of meat-packers? On their equilibrium employment level? Explain.

Suppose that dehydrated meat is an inferior good. Discuss the effect on the equilibrium wage rate and level of employment in the dehydrated meat industry of an increase in national income.

In the nation of Barronia, the market for construction workers is perfectly competitive. Explain what would happen to the equilibrium wage rate and equilibrium employment of construction workers under each of the following circumstances: a. Young adults in Barronia begin to develop a taste for living in their own homes and apartments, instead of living with their parents until marriage. b. Construction firms begin to use newly developed robots that perform many tasks formerly done by construction workers. c. Because of a war in neighboring Erronia, Erronian construction workers flee across the border to Barronia. d. There is an increased demand for automobiles in Barronia, and Barronian construction workers have the skills necessary to produce automobiles. e. Tuition at trade schools that qualify Barronians for construction work become cheaper.

Each of the following observations, ceteris paribus, implies something about a particular labor market. For each one, (1) identify the relevant labor market; (2) state whether you expect the wage rate in that market to be higher than otherwise, or lower than otherwise; and (3) identify which conceptual explanation for wage differences (among those discussed in the chapter) you are applying to reach your conclusion. a. Elevator repairers have a higher accident rate than most other jobs. b. People who work in New York City have to pay higher rent than other people. c. People like to work in New York City because there is a lot to do there. d. It takes rare diligence, motivation, and practice to become a concert pianist. e. Los Angeles has passed legislation requiring that fortune tellers become certified by the city. f. Office cleaning services don't like to risk hiring \(\mathrm{cx}\) convicts, because employers believe they are more likely to steal equipment than other employees.

Some advocates of the minimum wage argue that any decrease in the employment of the unskilled will be slight. They assert that an increase in the minimum wage will actually increase the total amount paid to unskilled workers (i.e., wage \(\times\) number of unskilled workers employed). Discuss what assumptions they are making about the wage elasticity of labor demand.
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