LABOR ECONOMICS
8th Edition
ISBN: 9781260004724
Author: BORJAS
Publisher: RENT MCG
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Chapter 2, Problem 12P
To determine
Determine the impact of new social security system on the number of hours worked by the retirees.
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In 2000, the ratio of people age 65 or older to people ages 20 to 64 in Ecocountry was 38,4 %. In the year 2060, this ratio is expected to be 56,8 %. Assuming a pay as-you-go Social Security system,
What change in the payroll tax rate between 2000 and 2060 would be needed to maintain the 2000 ratio of benefits to wages?
If the tax rate were kept constant, what would happen to the ratio of benefits to wages?
What other policies can be used for Social Security Reform?
Senator Deal proposes to offer a choice to future retirees: if you retire before age 70, the benefits are calculated on the last 35 years of income; if you retire at age 73, however, you receive benefits calculated on only the last 15 years of income. Which option will high-income workers likely choose? Low-income workers? Why?
Under current law, most Social Security recipients do not pay federal or state income taxes on their Social Security benefits. Suppose the government proposes to tax these benefits at the same rate as other types of income. What is the impact of the proposed tax on the optimal retirement age?
Chapter 2 Solutions
LABOR ECONOMICS
Ch. 2 - Prob. 1RQCh. 2 - Prob. 2RQCh. 2 - Prob. 3RQCh. 2 - Prob. 4RQCh. 2 - Prob. 5RQCh. 2 - Prob. 6RQCh. 2 - Prob. 7RQCh. 2 - Prob. 8RQCh. 2 - Prob. 9RQCh. 2 - Prob. 10RQ
Ch. 2 - Prob. 11RQCh. 2 - Prob. 12RQCh. 2 - Prob. 1PCh. 2 - Prob. 2PCh. 2 - Prob. 3PCh. 2 - Prob. 4PCh. 2 - Prob. 5PCh. 2 - Prob. 6PCh. 2 - Prob. 7PCh. 2 - Prob. 8PCh. 2 - Prob. 9PCh. 2 - Prob. 10PCh. 2 - A worker plans to retire at the age of 65, at...Ch. 2 - Prob. 12PCh. 2 - Prob. 13PCh. 2 - Prob. 14PCh. 2 - Prob. 15P
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- Why is severance of employment relevant to youth? Explain and provide detailsarrow_forwardConsider an income guarantee program with an income guarantee of $3,000 and a benefit reduction rate of 50%. A person can work up to 2,000 hours per year at $6 per hour. Mia, Lucas, Thomas, and Deborah work for 100, 333 %, 400, and 600 hours, respectively, under this program. The government is considering altering the program to improve work incentives. Its proposal has two pieces. First, it will lower the guarantee to $2.000. Second, it will not reduce benefits for the first $3,000 earned by the workers. After this, it will reduce benefits at a reduction rate of 50%. a. Draw the budget constraint facing any worker under the original program. Explain. b. Draw the budget constraint facing any worker under the proposed new program. Explain. I c. Which of the four workers do you expect to work more under the new program? Who do you expect to work less? Are there any workers for whom vou cannot tell if they will work more or less? Explain.arrow_forwardA worker's average indexed monthly earnings (AIME) will be their Social Security benefit at retirement. True Falsearrow_forward
- See the income and benefits information for a wage earner in an antipoverty program with a phased-out approach in the table below. How much more could one earn in total income if he chose to work 500 additional hours beyond whatever amount he currently works? Table 1: The Labor-Leisure Tradeoff with Assistance Reduced by 50 Cents for Every Dollar Earned Amount Worked Total Government Total (hours) Earnings Support Income $18,000 $20,000 $18,000 500 $4,000 $16,000 1,000 $8,000 $14,000 $22,000 1,500 $12,000 $12,000 $24,000 2,000 $16,000 $10,000 $26,000 2,500 $20,000 $8,000 $28,000 Select the correct answer below: O $0 O $2, 000 $4, 000 O $18, 000arrow_forwardPlease write a different answer there is an answer available for this on Bartleby already and tutors are copying and pasting that answer. but I need a new working from you 1. Consider an individual aged 64 who is eligible to collect full social security (public pension) benefits of $6,000 for a year. They have no other income but can work at a weekly wage rate of $600 for a maximum of 52 weeks. Receipt of benefits from the social security program is retirement tested. Specifically, the individual can earn up to $9,000 in annual wage income without a reduction in benefits; however, after $9,000 of earnings, benefits are reduced by 50% for every dollar earned, until the benefits are exhausted. a) Carefully draw and label the budget constraint for this individual. b) Suppose previously there was a retirement test, and then the test is eliminated, i.e., the individual now is allowed to keep all benefits, irrespective of their labour earnings. How would this affect the individual's…arrow_forwardAssume that the current disability benefit for individuals with disabilities that prevent them from working full time, is X kroner per day. The disability benefit goes to zero if a worker accepts a job for even one hour per week. Suppose that the benefit rules are changed so those disabled workers who take jobs that pay less than X kroner per day receive a benefit that brings their total daily income (wage plus the benefit) up to X kroner. When labor market earnings of a disabled individual rises above X kroner per day, their disability benefits end. Draw the old and the new budget constraints (label each clearly) associated with the disability benefit program, and analyze the work incentive effects of the change in benefitsarrow_forward
- When conducting a needs assessment, you can look at demographic data within your organization. You can also examine how your employees feel by collecting what types of cultural data? There are many protected classes under the Equal Employment Opportunity Act. Identify 3 classes.arrow_forwardhow to find the 90/10 income ratio?arrow_forwardA firm is considering adopting a plan in which it would pay employees less than their MRPL early in their careers and more than their MRPL late in their careers. For a typical worker at the firm MRPL = 10 + 0.1T, where T = the number of years which the worker has been employed at the firm and MRPL is measured in dollars per hour. The worker’s wage per hour is W = 8 + 0.2T. Assume that this wage is high enough to attract workers from alternative jobs, that the discount rate for the firm is zero, and that the expected tenure of a typical worker is 35 years. If workers retire after 35 years, will this plan be profitable for the firm? Explain. For how many years will the firm “underpay” it workers? Note:- Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism. Answer completely. You will get up vote for sure.arrow_forward
- What makes the Earned Income Tax Credit (EITC) different from other poverty-fighting programs? The amount of the credit is doubled if the head of household is attending college. The tax credit is phased out gradually, rather than at a specific income cutoff point. The amount of the credit is not determined by the number of dependent children in the household. The EITC doesn't require the recipient to pay a minimum amount of income tax in order to receive the credit. It creates less of an incentive to work than other programs.arrow_forwardSuppose the government introduced a child benefit equal to $7000 per year. For every dollar earned by the family, the benefit amount is reduced by 7 cents. At what level of earnings will the family no longer receive a child benefit?arrow_forwardSuppose that, on average, men earn $17 an hour and have an average of 15 years of schooling. Women earn $15 an hour and have an average of 14 years of schooling. If the estimated return to schooling for men is 0.30 (implying that each additional year of schooling translates into an additional 30 cents per hour) and the returns for schooling for women is 0.2, then the gender gap in schooling explains: 10% of the wage gap between men and women. 20% of the wage gap between men and women. 30% of the wage gap between men and women. 15% of the wage gap between men and women.arrow_forward
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