Assignment 1; Labour Economics and Markets Question 1 Suppose a countrys government is concerned about growing inequality of incomes and

wants to undertake a program that will increase the total earnings of the unskilled. It is considering two alternative changes to its current payroll tax, which is levied on employers as a percentage of the first K50, 000 of employee earnings: a. Extending employer payroll taxes to all earnings over K50, 000 per year and increasing the cost of capital by eliminating certain tax deductions related to plant and equipment. b. Reducing to zero employer payroll taxes on the first K20, 000 of earnings but taxing employers on all employee earnings between K 20, 000 and K 50, 000 (there will be no taxes on earnings above K50, 000). Analyze both proposals separately. Which is more likely to accomplish the aim of increasing the earnings of the unskilled? Why?

Question 2 Some real estate brokers split the commission revenue generated by each sale with the responsible agent. Others however require their agents to pay them (brokers) money up front and then allow the agent to keep the entire commission from each sale they make. Which agent would you predict to have the lager volume of sales- those who split all commissions with their employer or those who pay an up-front fee to their employer and keep the entire commission? Explain

Answer
A fee charged by a broker or agent for his/her service in facilitating a transaction, such as the buying or selling of securities or real estate. In the case of securities trading, brokers can be split into two broad categories depending on the commissions they charge. Discount brokers charge relatively low commissions, but provide no services beyond executing trades. Full service brokers charge higher commissions, but provide research and investment advisory services.