Which includes new wage rate and mandated overtime premium

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Reference no: EM13199286

When the Fair Labor Standards Act began to mandate paying 50 percent more for overtime work, many employers tried to avoid it by cutting hourly pay, so that total pay and hours remained the same.

a. Assuming that this 50 percent overtime-pay premium is newly required for all work beyond eight hours per day, draw a budget constraint that pictures a strategy of cutting hourly pay so that, at the original hours of work, total earnings remain the same.

b. Suppose that an employer initially paid $8 per hour and had a 10-hour workday. What hourly base wage will the employer offer so that the total pay for a 10-hour workday will stay the same?

c. Will employees who used to work 10 hours per day want to work more or fewer than 10 hours in the new environment (which includes the new wage rate and the mandated overtime premium)?

Reference no: EM13199286

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