Question

Suppose your firm employs moderately skilled workers in a labor market in which there are many Hispanic and White workers with satisfactory skill sets. These workers each have similar levels of productivity, but the cultural and lingual norms of the Hispanic workers are sufficiently different from your own that you simply prefer employing White workers. Your human resource manager, Lauren, has always been a little concerned about this, but you’ve erroneously suggested that your Hispanic workers simply aren’t at the same performance level as your White workers doing the same job. You pay your White workers $15.00 per hour, while your Hispanic workers are paid considerably less.

Lauren chose to commission a study and found that your labor demand for Hispanic workers is LDH = 55 – 3W, while the labor supply relation for the skill level you require is LS = -25 + 4W.   Lauren also noted through this study that marginal revenue product of labor for your White workers, MRPL = 30 – 1/3 L, is virtually identical to that of your Hispanic workers and is concerned you might be setting yourself up for a lawsuit.

1 How much do you pay your Hispanic workers?

2 What is the marginal revenue productivity of these workers?

3 What is the value of “d” in the relation W^H+d = W^W, where the superscript W stands for White workers?