One of the biggest decisions most of us have to make is whic

One of the biggest decisions most of us have to make is which industry to look for work. Compensation matters, but it also matters whether pay is rising or falling. The following table gives the annual average pay in five major industries for 2000 and 2014 (the figur include the pay of all workers, including top managers) Average Annual Nages and Salaries (Dollars)* Industry 2014 65,466 30,614 180,734 110,488 62,738 Real % Change (b Manufacturers Retail trade Finance and insurance Computer systems design and programming Hospitals 43,957 26,589 64,574 82,530 ource: Bureau of Econonic Analysis. Instructions: Use the table above to enter your responses to part a & b. Enter your responses rounded to two decimal places and include a negative sign (+) where appropriate a) Calculate the percentage increase in pay for each industry from 2000 to 2014. Complete the percentage change column in the table above. b) What was the real percentage increase in pay for each industry from 2000 to 2014, using the ruld of thumb that the real percentage increase is roughly the nominal percentage increase minus the inflation rate? (The CPI in 2000 wos 172 2, and the CPI in 2014 was 236.7) Complete the real percentage change columns in the table above c) Which, industry had the biggest increase in real wages? Retail trade Manufacturing

Solution

(a) % Change in 2014 = [(Value in 2014 / Value in 2010) - 1] x 100%

(b) Inflation Rate in 2014 = % Change in CPI = (236.7 / 172.2) - 1 = 1.3746 - 1 = 0.3746 = 37.46%

Real % Change in 2014 = Nominal % Change in 2014 - Inflation Rate in 2014

= Nominal % Change in 2014 - 37.46%, computed as above.

(c) Manufacturing

NOTE: Out of all 5 industries, Hospitals industry had biggest increase in real wages (= 24.91%). But out of Manufacturing and Retail Trade, the Manufacturing industry showed highest increase.

	2010	2014	% Change (a)	Real % Change (b)
Manufacturers	43,957	65,466	48.93%	11.47%
Retail Trade	26,589	30,614	15.14%	-22.32%
Finance & Insurance	64,574	1,00,734	56.00%	18.54%
Computer System Design	82,530	1,10,408	33.78%	-3.68%
Hospitals	38,635	62,730	62.37%	24.91%