2.Assume that workers whose incomes are less than $10,000 currently pay no federal income taxes. Suppose a new government program guarantee s each worker$5.000 up to $10,000,the worker must pay a 50-percent tax.Draw the budget line facing the workers under this new program.How is the program likely to afect the labor supply curve of workers? The budget line for workers under this program is a straight line at $5.000 whethe not If workers work only toe earn income,ie there are no other benefits such as“getting out of the house”or“gaining experience,"there is no incentive to work under the new program.Only wages yielding incomes greater than $10.000 will result in a positive labor supply. Income 810.000 5,000 Thousands of Hours per Year Figure 14.2 Income After Tax Government Total Income Subsidy Income 0 5.000 $5.000 $1,000 500 4,500 5,000 2.000 1.000 4,000 5,000 3.000 1,500 3,300 5.000 4.000 2.000 3.000 5.000 2,500 2,500 3.000 2.000 10,000 5,000 0 5.000 2. Assume that workers whose incomes are less than $10,000 currently pay no federal income taxes. Suppose a new government program guarantees each worker $5,000, whether or not he or she earns any income. For all earned income up to $10,000, the worker must pay a 50-percent tax. Draw the budget line facing the workers under this new program. How is the program likely to affect the labor supply curve of workers? The budget line for workers under this program is a straight line at $5,000. This line is shown in the figure and table below. Workers earn $5,000 whether they work or not. If workers work only to earn income, i.e., there are no other benefits such as “getting out of the house” or “gaining experience,” there is no incentive to work under the new program. Only wages yielding incomes greater than $10,000 will result in a positive labor supply. Income Thousands of Hours per Year $10,000 $5,000 Figure 14.2 Income After Tax Income Government Subsidy Total Income 0 0 5,000 $5,000 $1,000 500 4,500 5,000 2,000 1,000 4,000 5,000 3,000 1,500 3,500 5,000 4,000 2,000 3,000 5,000 5,000 2,500 2,500 5,000 6,000 3,000 2,000 5,000 7,000 3,500 1,500 5,000 8,000 4,000 1,000 5,000 9,000 4,500 500 5,000 10,000 5,000 0 5,000