Assignment:
As an economist, in addition to being able to analyze a situation, you will need to be able to communicate your ideas to others. In this writing assignment, you will be acting as an economic policy advisor. Your task is to read the scenario below, and do two things: 1) analyze
the policy being considered using the analytical tools we have been developing in ECO200, and 2) write a brief, professional memo outlining your policy recommendation.
Scenario:
Mayor McNeill has just been elected as the mayor of the small town Noronto. In Noronto, as of 2019, the city has 10 firefighters, each of whom are paid $65,000 a year.
Historically, the salary for firefighters has been set by a rather time-consuming process of bargaining with the firefighters' union that takes place at the end of every year. The bargaining process is extremely effective at making sure that the firefighters are able to afford the same quality-of-life every year (something that everyone agrees is very important), but it costs the town about $10,000 a year to hire a negotiator. One of Mayor McNeill's advisors suggested that instead of negotiating a new wage every year, it might be better to instead pay the firefighters a wage that is indexed to the CPI (Consumer Price Index). Mayor McNeill cares about the welfare of his firefighters, but also about the town's budget, so he has asked you, as his economic advisor, to explain the advantages/disadvantages of adopting the CPI plan, and make a suggestion about what to do.
Instructions:
Your task contains two parts, an analysis and a cover letter.
Analysis: In this section of your writing assignment, you should analyze the above scenario using the tools we have discussed in ECO200. You may assume that your audience has also had ECO200. This means that you should model and describe the situation under consideration
using the kind of framework we have discussed, and analyze the predictions of that model as it relates to the policy objectives. You should be clear about any assumptions you are making in your analysis, and if relevant, address what would happen if those assumptions do not hold.
Length: Your analysis part of the writing assignment should be approximately 700 words.
Cover Letter: In this section, you are communicating the main results from your analysis to Mayor McNeill in a clear and concise way. This letter should be professional but not technical in nature - it should explain the main ideas of your analysis in a way that can be understood by someone who is not an economist. The cover letter should make a recommendation, which could be for or against adopting the CPI plan on the basis of your economic analysis, or for what additional information needs to be gathered before making a decision.
Length: Your cover letter should be no more than one page (about 250 words), including the formatting. You should include your name and student number in the upper left-hand corner, but format the rest of this part of the assignment as a letter or a memo. We will not require a specific style for the letter, butit should include an appropriate salutation and closing, and be written in a professional tone.