Complete question:
Workers are compensated by firms with “benefits” in addition to wages and salaries. The most prominent benefit offered by many firms is health insurance. Suppose that in 2000, workers at one steel plant were paid $25 per hour and in addition received health benefits at the rate of $5 per hour. Also suppose that by 2010 workers at that plant were paid $26.25 per hour but received $22.5 in health insurance benefits.
a) By what percentage did total compensation (wages plus benefits) change at this plant from 2000 to 2010? Instructions: Round your answer to 2 decimal places. Total compensation by percent. What was the approximate average annual percentage change in total compensation? Instructions: Round your answer to 2 decimal places. percent.
b) By what percentage did wages change at this plant from 2000 to 2010? Instructions: Enter your answer as a whole number. Wages by percent. What was the approximate average annual percentage change in wages? Instructions: Round your answer to 1 decimal place. percent.
c) If workers value a dollar of health benefits as much as they value a dollar of wages, by what total percentage will they feel that their incomes have risen over this time period? Instructions: Round your answer to 2 decimal places. percent. What if they only consider wages when calculating their incomes? Incomes go by percent.
d) Is it possible for workers to feel as though their wages are stagnating even if total compensation is rising?
Answer:
a) 62.5℅ and average of 6.25℅
b) 5℅ and an average of 0.5℅
c)If the workers value a dollar of health benefits as they value that of wages, they will feel that income has increased by 62.5℅ over 10 years.
But if the workers consider wages only, they will feel income has increased by 5℅
d) Yes, because if the workers only check their wages, they are likely to think that income is stagnating
Explanation:
a) the total compensation amount in year 2000 was ($25 wages+$5 health) = $30
The total compensation amount in year 2010 was ($26.25 wages+22.5 health) = $48.75
•Therefore percentage increase in total compensation will be =
(48.75-30)/30 = 0.625 or 62.5℅
The average ℅ increase in 10 years (2000 to 2010) = 62.5/10
= 6.25℅
b) For the ℅ increase in only wages
(26.25 - 25) / 25
= 0.05 => 5℅
Average ℅ increase in wages in 10years
= 5℅/10
=0.5℅
c) If the workers value a dollar of health benefits as they value that of wages, they will feel that income has increased by 62.5℅ over 10 years.
But if the workers consider wages only, they will feel income has increased by 5℅
d) Yes, because if the workers only check their wages, they are likely to think that income is stagnant. If purchasing power increases by more than 5℅, they will feel their wage is stagnating or even reducing and that of health is increasing.
