Question

1. There are two groups, 1 and 2. In 1980, the wages that members of group 1 could earn if they worked were uniformly distributed between $20,000 and $120,000. At that time the wages that members of group 2 could earn if they worked were uniformly distributed between $10,000 and $110,000. What would the ratio of median wages have been between the groups be in 1980 if everybody worked? There is a disability program that pays $9,000 a year to people who don't work. Everyone who would earn less than $10,000 leaves the labor force and collects disability. Everyone else goes to work. In 1980, what was the ratio of median wages between the groups for people who actually worked? Between 1980 and 2010, income inequality increased. In 2010, the wages that members of group 1 could earn if they worked were uniformly distributed between $10,000 and $130,000. The wages that members of group 2 could earn if they worked were uniformly distributed between 0 and $120,000. What would the ratio of median wages between the groups be in 2010 if everybody worked? How does this compare with the comparable figure for 1980? No changes occurred in the disability program between 1980 and 2010. What was the median wage in 2010 for members of group 1 who actually worked? For members of group 2 who actually worked? In 2010, what was the ratio of median wages between the groups for people who actually worked? How does this compare with the comparable figure for 1980? Briefly explain why relative median wages changed. Does the change in relative median wages reflect labor market progress by group 2? Why or why not?

Answer 1

In 1980 if everybody worked i.e., from group 1 and group 2 on each payscales then the median age would be rs. 65,000 concluded by taking averages of incomes of both groups and then taking average again of the respective averages. Secondly if except less than 10000 everyone worked then average income would be 90,000 rs so people are benifiited wrongly by grabbing disabilities.  Thirdly after having datas of 2010 income scales also changed and that is how the datas of two periods 1980and 2010 differed by including rs. 0-10,000 earning group also. In 2010 with no changes in disability programme people earning median wage of 65,000rs which is 25,000 less than the median wage with disability of 1980. Inequality in income is quite visible in both the groups with the great differential amount between low and high wage. In 2010 wages were affected negatively so it was a loss but rich became richer only and one benrfit was to having included all which shows true picture of inequality.