Scribd Logo
Upload

Welcome to Scribd!

  • In Classroom Discussion of Ch28

    Uploaded by

    Thùy Phương
    5 views3 pages
    This document discusses the effects of an employer mandate that requires employers to provide health care benefits to employees. It shows that the mandate would shift the labor demand curve left, decreasing demand. If employees value the benefit at its cost, the labor supply curve would shift right, increasing supply. If wages adjust, supply and demand would balance at the original wage and employment level, so there is no change. If costs are split equally, employees value the benefit less than its cost, decreasing supply. This leads to lower wages and employment. But if employees fully value the benefit, wages and employment would remain the same, though employees would gain $2.

    Original Description:

    Copyright

    © © All Rights Reserved

    Available Formats

    DOCX, PDF, TXT or read online from Scribd

    Did you find this document useful?

    Is this content inappropriate?

    Report this Document
    This document discusses the effects of an employer mandate that requires employers to provide health care benefits to employees. It shows that the mandate would shift the labor demand curve left, decreasing demand. If employees value the benefit at its cost, the labor supply curve would shift right, increasing supply. If wages adjust, supply and demand would balance at the original wage and employment level, so there is no change. If costs are split equally, employees value the benefit less than its cost, decreasing supply. This leads to lower wages and employment. But if employees fully value the benefit, wages and employment would remain the same, though employees would gain $2.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    5 views3 pages

    In Classroom Discussion of Ch28

    Uploaded by

    Thùy Phương
    This document discusses the effects of an employer mandate that requires employers to provide health care benefits to employees. It shows that the mandate would shift the labor demand curve left, decreasing demand. If employees value the benefit at its cost, the labor supply curve would shift right, increasing supply. If wages adjust, supply and demand would balance at the original wage and employment level, so there is no change. If costs are split equally, employees value the benefit less than its cost, decreasing supply. This leads to lower wages and employment. But if employees fully value the benefit, wages and employment would remain the same, though employees would gain $2.

    Copyright:

    © All Rights Reserved
    Download as DOCX, PDF, TXT or read online from Scribd
    Flag for inappropriate content
    of 3

    Suppose that Congress passes a law requiring employers to provide employees some

    benefit (such as Health Care) that raises the cost of an employee by $4 per hour.
    a. What effect does this employer mandate have on the labor demand?

    Wage

    S0

    $4

    D0

    D1
    Employment

    b. If employees place a value on this benefit exactly equal to its cost, what effect
    does this employer mandate have on the labor supply?

    Wage

    S0

    $4 S1

    D0

    Employment

    c. If the wage is free to balance supply and demand, how does this law affect the
    wage and the level of employment?

    1
    Wage

    S0

    S1
    W0 Wage ↓
    Employment : Same

    W1
    D0

    D1
    Employment
    L0

    Employer's Wage Employee's Wage Employment


    Cost Income
    Before Law W0 W0 L0
    After Law W1+$4(cost) W1+$4(benefit) L0
    = W0 = W0
    change NO NO NO

    Employers : Same Employees : Same

    d. Now suppose employer and employee share $4 cost equally, suggesting employer
    pays $2 of Health Care cost for employee, and employee pays $2 of Health Care
    cost for himself.
    (i)Employee doesn't place a value on the benefit exactly equal to its cost.

    Wage

    S1

    W1+$2 $2 S0
    Wage : Same
    Employment ↓
    W1=W0

    D0
    W1-$2 $2
    D1
    Employment
    L1 L0

    2
    Employer's Wage Employee's Wage Employment
    Cost Income
    Before Law W0 W0 L0
    After Law W1+$2 W1-$2 L1
    = W0+$2 = W0-$2
    change ↑(worse off) ↓(worse off) ↓

    (ii)Employees place a value on this benefit exactly equal to its cost.

    Wage
    S1 (doesn't place a value)
    $2 S0
    W1+$4 S2 (place a value)
    $4
    W1+$2=W0
    Wage ↓
    W1 Employment : Same

    $2 D0
    D1
    Employment
    L0

    Employer's Wage Employee's Wage Employment


    Cost Income
    Before Law W0 W0 L0
    After Law W1+$2= W0 W1+$4(benefit) L0
    change NO ↑by $2 NO

    Employer : Same Employees : Better off

    You might also like