Suppose Congress passes a law requiring all employers to set up and contribute to an retirement...

Suppose Congress passes a law requiring all employers to set up and contribute to an retirement plan for all of their employees. This mandatory retirement plan is estimated to cost restaurant owners $4 per hour on average for their employees. Before this mandate was imposed, the average wage for restaurant workers was $16 an hour and very few restaurants contributed to retirement plans for employees.

(6 points) What effect will this mandate have on the demand for labor by restaurants and the number of people employed by restaurants?

(6 points) What will the approximate average wage for the restaurant workers be after this mandate?

Expert Solution

a. The Mandate by the government increases the cost of hiring employees for the employer and this increase in the cost of hiring will reduce profits of the employers which in turn reduces their production and this decline in production will also reduce the demand for labor by the employer. Thus, demand for labor by restaurants will reduce and this will also reduce the number of people employed by restaurants.

b. The approximate average wage for the restaurant workers after this mandate will increase to $16 + $4 = $20 per hour.

Rahul Sunny answered 2 years ago

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