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Chapter 15: Q. 33 (page 378)

Explain how you would create a government

program that would give an incentive for labor to increase hours and keep labor from falling into the poverty trap.

Short Answer

Expert verified

We create a government program that would give an incentive for labor to growth hours and keep hard work from falling into the poverty trap by way of lowering welfare payments by means of authorities.

Step by step solution

01

Concept Introduction

Welfare payments are payments made by the government to help the poor meet their fundamental necessities.

Poverty traps or cycles are the effects of self-reinforcing mechanisms that inspire poverty to stay as soon as it's been set up unless there's out of doors intervention.

02

Explanation

Welfare payment program by the government should not increase incentives on more working hours, rather they can decrease working hours for low paying jobs, in order to encourage people to work hard for high paying jobs.

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Most popular questions from this chapter

Who is included in the top income quintile?

Imagine that the government reworks the welfare policy that was affecting Jonathan in question 1, so that for each dollar someone like Jonathan earns at work, his government benefits diminish by only 30 cents. Reconstruct the table from question 1 to account for this change in policy. Draw Jonathan鈥檚 labor-leisure opportunity sets, both for before this welfare program is enacted and after it is enacted.

Table 15.9 shows the share of income going to each quintile of the income distribution for the United Kingdom in 1979 and 1991. Use this data to calculate what the points on a Lorenz curve would be, and sketch the Lorenz curve.

How did inequality in the United Kingdom shift over this time period? How can you see the patterns in the quintiles

in the Lorenz curves?

Share of Income19791991
Top quintile39.70%42.90%
Fourth quintile24.80%22.70%
Middle quintile17.00%16.30%
Second quintile11.50%11.50%
Bottom quintile7.00%6.60%

A group of 10 people have the following annual incomes: \(24,000, \)18,000, \(50,000, \)100,000, \(12,000, \)36,000, \(80,000, \)10,000, \(24,000, \)16,000. Calculate the share of total income that each quintile receives from this income distribution. Do the top and bottom quintiles in this distribution have a greater or larger share of total income than the top and bottom quintiles of the U.S. income distribution?

Using two demand and supply diagrams, one for the low-wage labor market and one for the high-wage labor market, explain how a program that increased educational levels for a substantial number of low-skill workers could reduce income inequality.
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