How Does Mandating Free Cell Phones for Workers Affect Equilibrium Wages?

[whizkid11]

Homework Statement

Suppose that a new law requires every firm to provide its workers with free cell phones. The cell phones are worth $200 a year to the works and cost the firms $500 a year to provide. On a labor supply/demand curve, how do I know how much the equilibrium wage goes up or down after the law is enacted?

The Attempt at a Solution

I am assuming the equilibrium wage goes down between $200 and $500 dollars, but am not sure how to justify this mathematically?

 

[nate808]

I would approach this problem by first understanding the basic principles of supply and demand in the labor market. In this case, the new law requiring firms to provide free cell phones to their workers would be considered a non-wage benefit. This means that it is a form of compensation that is not directly tied to the worker's wage.

Next, I would consider the impact of this new law on the supply and demand of labor. On the supply side, the provision of free cell phones would increase the overall value of the job, making it more attractive to potential workers. This would lead to an increase in the supply of labor, as more individuals would be willing to work at the given wage.

On the demand side, the cost of providing free cell phones would increase the overall cost of labor for firms. This would lead to a decrease in the demand for labor, as firms may not be able to afford to hire as many workers at the same wage.

Based on these factors, we can expect the equilibrium wage to decrease after the law is enacted. This is because the increase in labor supply would put downward pressure on wages, while the decrease in labor demand would also contribute to a decrease in wages.

To justify this mathematically, we can look at the supply and demand curves in the labor market. The supply curve would shift to the right, indicating an increase in supply, while the demand curve would shift to the left, indicating a decrease in demand. The new equilibrium point would be at a lower wage, as shown in the diagram below.

[Insert diagram showing decrease in equilibrium wage]

In conclusion, as a scientist, I would use the basic principles of supply and demand to understand how the new law would impact the equilibrium wage in the labor market. By considering the effects on both supply and demand, we can expect the equilibrium wage to decrease after the law is enacted.

 

[Blueshift5]

I would approach this problem by first analyzing the supply and demand curves for labor in the market. The introduction of the new law requiring firms to provide free cell phones to their workers will affect the equilibrium wage in the market.

On the demand side, the cost of labor for firms will increase due to the added expense of providing cell phones. This will shift the demand curve for labor to the left, resulting in a decrease in the equilibrium wage.

On the supply side, the workers will now receive a benefit worth $200 per year, which will increase their willingness to work at a lower wage. This will shift the supply curve for labor to the right, resulting in a decrease in the equilibrium wage.

Therefore, both the demand and supply curves for labor will shift to the left, resulting in a decrease in the equilibrium wage. The magnitude of this decrease cannot be determined without knowing the specific slopes and intercepts of the supply and demand curves. However, it is safe to say that the equilibrium wage will decrease by an amount between $200 and $500, as the added cost to firms will likely outweigh the benefit to workers.

In conclusion, the equilibrium wage will decrease after the law is enacted due to the shifts in the supply and demand curves for labor.