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Luca Betancourt
David Maldonado
Pierre Sauniere
ECO 300-N
Professor: Rong Hai
1.Pleaseexplainwhatcollegewagepremiumis.
Itiswelldocumentedthatcollegegraduatesearnsignificantlyhigherwageson
averagethanthosewithonlyhighschooldiploma.Thecollegewagepremium
hasbeenacentralfocusforresearchersbecauseitisbothlargeandgrowing.
Thecollegewagepremiumiscalculatedastheratioofthemedianhourlywage
forthoseholdingabachelorsdegreeandthemedianhourlywageforthose
whohaveonlycompletedhighschool.
2.PleaseexplainthechangesincollegewagepremiumintheU.S.sincethe
1960susingdemandandsupplytheory.
Overthepastfewdecades,thewagesofskilledhighincomeworkershave
grownsubstantially,whilethewagesofunskilledlowincomeworkershave
fallenslightly.From1978to2009,peopleinthetop20percentoftheincome
distributionexperiencedanincreaseintheiraveragereal(inflationadjusted)
pretaxhouseholdincomeof45percent,whilethoseinthebottom20percent
sawtheiraveragerealpretaxincomeincreasebyonly4percent.Whilethe
supplyofunskilledworkerspeoplewithlimitededucationshasgrown
substantially,thedemandforthemhasrisenonlyslightly.Ontheotherhand,
whilethesupplyofskilledworkerse.g.,engineers,scientists,managers,and
economistshasgrownslowly,thedemandhasrisendramatically,pushing
wagesup.
3.PleasediscusschangesintheU.S.economythatcouldpotentiallyaffectthe
demandforcollegeworkers.
ChangesintheUSeconomythatcouldpotentiallyaffectthedemandfor
collegeworkersare:theriseofautomation,machinelearning,andartificial
intelligence.Automationhasbeenresponsibleforthelossofover5million
jobsalready.Allofthesetechnologicalchangesmaydecreasetheoverall
demandforlabor,includingcollegeeducatedworkers.Whiledemandasa
wholeisexpectedtofall,thedemandforcollegeeducatedworkersisexpected
tofallmoreslowlythanthedemandforpersonswithonlysecondaryeducation.
Otherfactorsinthemoreshorttermthatmayinfluencechangesin
demandforcollegeworkersisthestrippingofregulationsunderPresident
Trump.Withreducedregulations,andneglectinganypotentialbubblesthat
mayburst,thedemandforcollegeeducatedworkersmayincreasedueto
increasecapitalflowintheshortterm.Thisisassumingthattherewouldbeno
bubbles,andthatderegulationincreasedthetepidlaborforceparticipationrate
andkeepsunemploymentatahealthylevel.
4.PleasediscusschangesintheU.S.economythatcouldpotentiallyaffectthe
supplyofcollegeworkers.
ChangesintheUSeconomythatcouldpotentiallyaffectthesupplyof
collegeeducatedworkersaretheincreasingfocusontradeschools,intandem
withtheincreasingcostofattendingcollege.Thethereis$1.2trillioninloans
currentlyamassedbyAmericanstudents.Asthecostofeducationskyrockets,
thedebtthatisincurredbymanystudentsisunsustainable.Withaboveaverage
growthprospectsforskilledtradesthatdonotrequireadegree,withanaverage
growthrateof20%,thesupplyofcollegeeducatedworkersmaydecrease.
5.PleaseselectaparticularpolicythatU.S.governmenthasimplementedin
thepastanddiscusshowdiditaffectthedemandand/orsupplyofcollege
workersandsubsequentlythecollegewagepremium.
TheH1Bvisaprogramhelpsprofessionalworkersfromdifferent
countriesfindemploymentintheU.S.Throughthisprogramcappedata
maximumof65,000visasperyear(AmericanImmigrationCouncil),American
employerscanfillintheirneedsforhighlyeducatedworkerswithatleasta
bachelorsdegreeoranequivalent.Thisprogramgrantsforeignprofessionalsa
periodofthreeyearsduringwhichtheycanworkintheU.S.,aswellasthe
chancetoextendtheirstaytoamaximumofsixyears(AIC).
Thedemandforcollegegraduatesisalwayshigherinthebigger
metropolitanareas,andtheimplementationoftheH1Bvisashashelpedfulfill
partofthatdemandbysupplyinghighlyskilledworkerstoseekingemployers.
Between2010and2011,106metropolitanareasacrosstheentirecountryhad
atleast250requestsforH1Bvisas(AIC).Hiringforeignershelpsthe
economybyfillingupthegapsofunemploymentfromthelackeducated
professionals,aswellashelpingcreatenewjobsandexpansionhence
increasingdemandforAmericanborncollegeworkers.TheH1Bvisaprogram
hashadapositiveimpactonthecollegewagepremium;ifwelookatthe
statisticsfrom1990to2010wecanseethatforeverypercentagepointinthe
increaseofH1Bworkerswageincrease,thereisa7to8pointincreaseinthe
wagesofnationalborncollegeeducatedworkers.Thisisastatisticdespitethe
factthatH1BworkerswagesareslightlyhigherthanthoseofAmericanborn
collegeworkers.