Question

A worker, who is typical in all respects, works for a wage of $30,000 per year in a perfectly safe occupation. Another typical worker does a job requiring exactly the same skills as the first worker, but in a risky occupation with a known death probability of 1 in 1,000 per year, and receives a wage of $36,000 per year. What value of a human life for workers with these characteristics should a cost-benefit analyst use?

Answer 1

$6,000,000

Step-by-step explanation:

Look up attached file

Answer 2

$6,000,000

Step-by-step explanation:

Change in risk = 0 in 1,000 to 1 in 1,000 = 0 to 0.001 = +0.001

Change in wage = $30,000 to $36,000 = +$6,000

Therefore:

wage/risk = 6,000/0.001

= $6 million or $6,000,0000

The value of a human life for workers with these characteristics should a cost-benefit analyst use is $6,000,000 because workers are willing to receive an extra $6,000 for a 1 in 1,000 increase in risk of death, implying a value of life of $6 million)Value of human life for workers with these characteristics = $6 million .

In order words the workers require $6,000 to accept a death risk of .001. The value of life implied by this is $6,000/.001 = $6,000,000.