MICRO & MACRO ECONOMICS OF USA

Running head: MICROECONOMICS
Microeconomics
Name of the Student
Name of the University
Author Note

MICROECONOMICS
1
Table of Contents
Answer 1..........................................................................................................................................2
Answer 2..........................................................................................................................................3
Reference list...................................................................................................................................5

MICROECONOMICS
2
Answer 1
According to the author, the income inequality is an evolving concern for the USA
economy over the last two decades. The sharp dispersion in the earnings across different labor
sections has growing widen compared to other developed countries. The major portion of the
income has been concentrated by only 1% of the USA population. Rest of the 99% households
has been reported to face lack of higher education, wage premium and cognitive ability. The
sheer improvement in the skill has led to the difference in the employability and earnings
capability.
Referring to the paper, three reasons have been mentioned to analyze the growing
disparity in earnings to education and skills. First, the educational cost has surged up in several
numbers of advanced countries over the last couple of years. Around two-thirds of the earnings
inequality is accountable for the growing expenditure related to the secondary and postsecondary
education. This creates great wage dispersion as higher educated people earn more than the low
educated people. Second, literature plays as an influencing factor between demand and supply of
labor. It has been observed that the changes in the skill premium has doubles the income of the
college graduates during last three decades. As a result of that, the economy encounters with
different purchasing power of the citizens. Third, skill premium highlights the gap in terms of the
social value. It illuminates the constructive function of the public policy in order to maximize its
benefit and reduce the cost of inequity.
As per the article, the real value of the minimum wage has been deteriorated to an
extreme level. This has resulted in the decrease in the demand for the employment opportunities
for the non-college students (Jaumotte and Osorio 2015). These students have not been employed