Consider a guest worker program whereby Mexican citizens could work in the U.S.People in Mexico would be matched with a U.S. employer. The employer would have todemonstrate a need for workers and prove that U.S. citizens won’t take the jobs. Thematched workers would get “guest worker” cards allowing them to stay in the US forthree years. The cards would be renewable for three-year periods but not indefinitely.a. Draw labor market demand and supply graphs showing the change in labordemand and/or labor supply in the U.S. and in Mexico resulting from thisprogram.
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Consider a guest worker program whereby Mexican citizens could work in the U.S.People in Mexico would be matched with a U.S. employer. The employer would have todemonstrate a need for workers and prove that U.S. citizens won’t take the jobs. Thematched workers would get “guest worker” cards allowing them to stay in the US forthree years. The cards would be renewable for three-year periods but not indefinitely.a. Draw labor market demand and supply graphs showing the change in labordemand and/or labor supply in the U.S. and in Mexico resulting from thisprogram. (So you want two labor supply curves: one for Mexico and one for theUnited States.) Explain your graphs. Assuming that Mexican citizens currentlyface formidable barriers to working in the United States, what effect would youexpect enactment of this program to have on equilibrium wages and employmentin each country? (i.e. What happens in Mexico? What happens in the US?)b. Such a program involves administrative costs. Suppose that after a year ofoperation, the U.S. government starts to recover these administrative costs bymaking employers with guest workers pay a tax equal to 10% of the wages paid totheir guest workers. Draw labor market demand and supply graphs showing thechange in labor demand and/or labor supply in the U.S. and in Mexico resultingfrom this policy for recovering administrative costs. Explain your graphs. Whateffect would you expect enactment of this program to have on equilibrium wagesand employment in each country?2. In a particular industry the labor supply curve is W=10+2NS while the labor demandcurve is W=40-ND, where NS is labor supply and ND is labor demand in employmentterms.a. What are the equilibrium wage and employment if the labor market iscompetitive? What is the unemployment rate in the competitive market?b. Now suppose that the government sets a minimum hourly wage of 36. How manyworkers would…
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