Comp & Benefits Chapter 7

Product market factors

Level of competition and degree of product demand

Matching the market wage and offering no performance based pay

This strategy is most likely to appeal to people who just want to show up and are risk everse

T/F: The marginal product and the marginal revenue of a new hire are not directly measurable quantities.

True

Due to restrictions placed by the product market on an employer's pay level, what strategies must an employer use ti compensate for paying above the maximum? (Select all that apply) a. ensuring that competitors reduce the prices of similar products b. allocating a larger share of total revenues to cover labor expenses c. passing the higher pay level on to consumers by increasing prices d. increasing the resources used for performance-linked incentives

b, c

According to a study on managers' approaches to pay decisions under varying economic conditions, how did level of unemployment affect wage adjustment recommendations? a. high unemployment meant cuts in salaries for most managers b. it was considered the most important determinant of wages c. it had almost no impact on wage adjustment recommendations d. high unemployment was seen as reason enough for pay hikes

c

Calculate the pay level of an organization that has labor costs of $16,000,000 for 400 employees. a. $16,000 b. $64,000 c. $40,000 d. $80,000

c

Companies with higher profits than competitors can share this success with employees by leading competitors' pay levels and/or through bonuses that are tied to profitability. Academics view this as: a. stock sharing b. risk liability c. marginal sharing d. rent sharing

d

One of the common cuts companies make in times of high unemployment is decreasing: a. the number of pay freezes they usually make b. the number of days off for employees c. quality and productivity to save resources d. contributions to 401k retirement plans

d

The ________ is the increase in returns generated by the employment of one additional person by a firm, while keeping other production factors constant. a. employment differential b. compensating differential c. marginal cost of production d. marginal revenue of labor

d

Example of a high-wage, high-services strategy

A company that ensures that its highly-paid employees maintain a balance between their work and their personal lives

Example of a low-wage, high-services strategy

A company that offers many services for the improvement of its low-wage employees

_________ is a return (profits) received from activities that are in excess of the minimum pay level needed to attract people to those activities.

Rent

Identify an accurate statement about the pay level in a company: a. a company may have varying pay levels for different job families b. the variations in pay within a company are always identical to those of its competitors c. the variations in pay within a company are always identical to those in the labor market d. a single company has the same pay level across all job types

a

Example of a low-wage, no-services strategy

A company that outsources all of its work in order to compete by producing its goods and services for the least compensation possible

Jobs that a company would use lead policy

A company uses this for jobs requiring skills that are critical to its success

Jobs that a company would use a lag policy

A company uses this for jobs that can easily be filled in the local labor market

Jobs that a company would use a match policy

A company uses this for jobs that require skills that are not very critical to its success

Match policy

A company uses this for jobs that requires skills that are not very critical to its success

________ _________ refers to the pay relationships among organizations - an organization's pay relative to its competitors.

External competitiveness

T/F: It is enough for an employer to pay at or above the legal minimum wage in order to be considered to be in compliance.

False - must also meet provisions of prevailing wage laws and equal rights legislation

Labor market factors

Nature of demand for employees and nature of supply of employees

Organization factors

Nature of the industry, company strategy and size, and characteristics of individual managers

________ _________ begins with the traditional alternatives of lead, meet, or lag; it then adds a second part, which is to offer employees choices within limits in the pay mix.

Share choice

Paying below the market for base pay yet offering generous bonuses

This strategy is most likely to appeal to risk takers who seek flexible schedules, more interesting projects, or more opportunities for promotion

Employers in markets with no competition have the ability to: a. set whatever price they desire b. regulate competitive markets c. keep a standard reservation wage d. pay below the minimum wage

a

What are the assumptions that theories of labor markets usually begin with? (Select all that apply) a. all costs associated with employment are reflected in pay rates b. the markets faced by employers are essentially noncompetitive c. a single employer has no advantage if it pays above or below the market rate d. people are homogeneous and thus interchangeable e. employees need to be retained at all costs as they are irreplaceable f. employers always aim to maximize returns

a, c, d, f

According to the theory of human capital, improving productive skills by making investments in training will raise one's: a. risk aversion b. marginal product c. compensating differential d. reservation wage

b

In order to discourage unions, many nonunionized companies tend to: a. lag competition b. meet or lead competitors' wages c. set a low reservation wage d. outsource a large part of their labor

b

Identify the option to reduce labor expenses that is used when work flows to the people. a. increasing the value of compensating differentials b. segmenting the source of labor c. sending work to other cities or nations d. establishing a standard reservation wage

c

What are the effects of offering high wages in a lead pay-level policy? (Select all that apply) a. reduced satisfaction with pay b. reduced employee attraction and retention c. reduced vacancy rates and training time d. reduced turnover and absenteeism

c, d

When are the data from product market competitors likely to be given greater weight than that of labor market competitors in defining a relevant market? (Select all that apply) a. when the source of labor can be segmented to reduce costs b. when worker skills are applicable to a wide variety of markets c. when employee abilities are specific to the product market d. when labor expenses from a large share of total expenses e. when labor supply is not responsive to pay changes f. when demand for a product is responsive to price changes

c, d, e, f

A lead pay-level is capable of masking negative job traits that lead to higher ________ later on. a. attraction b. retention c. productivity d. turnover

d

A study on how economic factors translated into wage decisions for managers found that the profitability of a company was viewed by managers as a factor for higher management in determining: a. a standard reservation wage b. marginal revenues c. individual pay adjustments d. the general pay budget

d

An employer will keep hiring until the marginal revenue generated by the last hire equals the: a. average of the array of rates paid by the employer b. costs of vetting and training that person c. labor costs for all the employees in an organizations d. expenses associated with employing that person

d

What are the observable results of increases wages? (Select all that apply) a. greater pay satisfaction b. improved employer size and ability to pay c. improved quality, effort, and performance d. greater employee attraction and retention e. greater attrition rates

a, c, d

_________ provided by an employer are considered integral to every citizen's economic security and are regulated in most countries. a. training and promotions b. basic psychological evaluations c. pensions and health care d. housing and travel benefits

c

Which option to reduce labor expenses is used when people flow to the work? a. segmenting the source of labor b. offshoring work c. sending labor to other nations d. using people in different locations

a

How do managers choose their relevant labor markets? (Choose all that apply) a. they consider the products, size, and location of competitors b. they evaluate the value of potential employees' self-investments c. they evaluate the importance of a job to their organization's success d. they look at the skills and knowledge required for a job e. they examine the reservation wage set by their competitors

a, c, d

how did the study on managers' approaches to pay decisions in light of varying unemployment, profitability, and labor market conditions directly contradict the efficiency-wage theory? a. managers believed that problems with attracting and keeping people were the result of inadequate compensation b. managers blamed difficulties with attracting and retaining people on poor management c. managers perceived rent sharing to be a means of increasing worker effort and reducing shirking d. managers thought it prudent to pay less when market conditions permit lower pay as it helps attract and retain employees

b

According to the efficiency-wage theory, what do high wages need to do if they are to increase efficiency and reduce labor costs? (Select all that apply) a. raise organizational pay level b. boost worker effort and decrease shirking c. lure higher-quality applicants d. lower the need to supervise employees e. increase worker monitoring f. decrease turnover

b, c, d, f

The level of demand that _________ is that level at which the marginal revenue of the last hire in the company equals the pay for that employee. a. helps a company break even b. permits a company to hire many more people c. maximizes profits for a company d. equalizes an entire company's revenues and labor costs

c

Which combination may boost employee commitment and encourage teamwork, which may turn improve productivity? a. a lag pay-level policy combined with the promise of increased future returns b. a low-wage, no-services policy combined with high risk to the company reputation c. a lead pay-level policy combined with internal misalignment and murmuring d. a pay-with-competition policy combined with a lack of offered bonuses

a

The dashboard form of reporting the mix of pay forms of a company focuses on: a. the importance of internal competition b. the relative importance of each form within a single company c. comparing each pay form to the market d. contrasting each pay form with its reservation wage

c

Identify an accurate statement about a reservation wage: a. a reservation wage is the sum of all bonuses offered b. a job seeker will not take up a job offer that offers his or her reservation wage as an incentive c. a job seeker may accept a job offer above or below his or her reservation wage level d. a reservation wage may be more than or less than the market wage

d

In the short term, a company's factors of production other than its human resource pool are _________, which causes each new hire to have lower marginal productivity than the previous hire. a. indeterminable b. inexhaustible c. inaccessible d. inalterable

d

Which of the following labor supply theories explains pay-level differences on the premise that higher wages flow to people who invest in themselves to increase their potential productivity? a. the efficiency-wage theory b. the theory of compensating differentials c. the reservation-wage theory d. the theory of human capital

d

Technology-intensive industries tend to _______ than labor-intensive industries. a. pay higher b. pay lower c. have higher reservation wages d. have lower reservation wages

a

The concept of upward sloping supply in theories of labor markets assumes that as wage rates increase, more people are willing to apply for a job position. However, offers of increased pay may not boost labor supply when: a. unemployment rates are low b. a country is going through economic recession c. the market is saturated with job seekers d. there are few jobs in the market

a

The higher wages that employees offer to make up for the negative characteristics of a job are known as: a. compensating differentials b. amelioratory wage rates c. hidden insurance payments d. marginal product revenues

a

Identify the characteristics of jobs that are thought to make them more susceptible to offshoring. (Select all that apply) a. little need for local insight on unique cultural factors b. continuously changing nature of work c. little need for worker interaction d. inputs/outputs easy to transmit electronically e. easy to routinize f. little need for labor of any kind

a, c, d, e

One of the negative effects of a _________ is that it forces an employer to raise the wages of current workers in order to avoid internal misalignment and murmuring. a. lay pay-level policy b. lead pay-level policy c. competition maximization policy d. pay-with-competition policy

b

Employers in extremely competitive markets find it more difficult than other employers to: a. pay their employees minimum wage b. create a standard reservation wage c. avoid the scrutiny of government regulators d. increase prices without loss of revenues

d

Stores that fix the price of each item or ads that mention the starting wage of a job opening are examples of _______, whereas organizations that permit haggling over the terms and conditions until a consensus is reached are examples of ________. a. flexible organizations; noncompetitive organizations b. noncompetitive organizations; rigid organizations c. the bourse; the quoted-labor market d. the quoted-price market; the bourse

d

When outsourcing labor, companies must determine: a. how long the cost of segmenting labor sources outweighs the benefits b. for how long their employees can be hired at a higher wage than that of their peers c. how long the labor cost advantage at a significantly lower pay will return d. for how long their employees can legally be uprooted from their countries

c

According to the efficiency-wage theory, what do high wages need to do if they are to increase efficiency and reduce labor costs? (Select all that apply) a. lure higher-quality applicants b. boost worker effort and decrease shirking c. lower the need to supervise employees d. increase worker monitoring e. raise organizational pay level f. decrease turnover

a, b, c, f

What are the only things that a manager using the marginal revenue product model must do? (Select all that apply) a. calculate the pay level set by market forces b. calculate the number of people hired at a loss c. calculate the marginal revenue generated by each new hire d. calculate the difference in pay levels across competitors

a, c

When is paying above market an efficiency strategy for an organization? a. when a competitor with a lower pay level has greater reliability and higher morale b. when the labor costs exceed the organization's returns c. when the organization's revenues exceed the strategy's expenses d. when a competitor has a lower pay level and exponentially higher returns

c

Evidence has consistently proven that large organizations tend to ________ than do small organizations. a. have a higher reservation wage b. assign a lower marginal value to talented individuals c. offer lesser compensation d. pay higher wages

d

Which of the following labor supply theories explains pay-level differences on the premise that higher wages flow to people who invest in themselves to increase their potential productivity? a. the efficiency-wage theory b. the reservation-wage theory c. the theory of human capital d. the theory of compensating differentials

c