Question

Two companies require identical skills and training from their workers. Both employ 10,000 people. On average, RealSafe has one worker fatality per year, while NotsoSafe has two worker fatalities per year. Jobs at RealSafe pay $50,000/year, while jobs at NotsoSafe pay $50,500/year. In the space below, answer the following questions, delineated by question number:_______.
1. Why do these jobs with identical requirements pay different salaries, based on the information presented here?2. What is the risk for a worker of a fatal accident at each company? What is the pay premium associated with that risk?3. The value of a statistical life is the difference in wage divided by the difference in risk. What is the value of a statistical life for workers with these skills and training?4. Do you expect this value of a statistical life to be appropriate for the population as a whole? Why or why not?

Answer 1

Explanation:

1. If the salary paid by both companies were same people would prefer to work at Realsafe since it more safer. But not too safe provides a higher pay which makes people accept the higher risk over there.

2.The for a worker at Realsafe is 1/10000, while at not to safe it’s 2/10000. The premium associated with that risk Is the $500/year from not to safe.

3. Value of statistical life

= 1*$500 / 1/10000

= 5,000,000.

4. If the value of statistical life is constant across all the population it’s acceptable and valid.