If a workfare program faces a fixed budget limit,B,then total program costs are largely fixed in advance and policy analysts may wish to ask: How many workers are likely to obtain employment through the program? If program administrators have set the program wage w and the target ratio n of non-wage to wage costs,then the budget will finance the creation of roughly _______worker-days of employment.
A) B x [w(1+n)]
B) B/[w(n)]
C) B/[w(1+n)]
D) [w(1+n)] /B

Question

Quizplus · Accepted Answer

The budget will finance the creation of total worker-days of employment, which is equal to the budget divided by the cost per worker-day. The cost per worker-day is the sum of the wage rate and the non-wage cost per worker-day, which is equal to the wage rate times the target ratio of non-wage to wage costs. Therefore, we can set up the following equation:

Total worker-days = B / (w + w*n)

Simplifying, we get:

Total worker-days = B / (w*(1+n))

This is equivalent to answer choice C.

If a Workfare Program Faces a Fixed Budget Limit,B,then Total