Compensation chapter 7
Labor costs
(pay level) Times (number of employees)
What are the four assumptions for labor markets?
1) employers seek max profits 2) people are homogeneous (interchangeable) 3) pay rates reflect all costs associated with employment 4) markets faced by employers are competitive (no advantage for employers to pay above or below market rate)
lag pay level policy
a policy of paying below-market rates may hinder a firm's ability to attract potential employees, but this can be coupled with the promise of higher future returns
Rent
a return (profits) received from activities that are in excess of the minimum (pay level) needed to attract people to those activities
pay forms
are the various types of payments, or pay mix, that make up total compensation
Bourse market
ebay is an example of what type of market?
Labor Demand in short term
employer cannot change any other actor of production, only human resources
Compensating differentials
explain the presence of various pay rates in the market
Human captial
general and specific skills require an investment in human capital. firms will invest in firm-specific skills, but not general skills. workers must pay for investment in general skills.
Utility theory
help compare costs and benefits of different pay level polices
efficiency-wage theory
high wages may increase efficiency and actually lower labor costs if they: 1. attract higher-quality applicants 2. lower TO 3. increase worker effort 4.reduce shirking 5.reduce the need to supervise employees
Pay satisfaction
improved attraction and retention of employees, and higher quality,effort and/ or performance
marginal product of labor
is the additional output associated with the employment of one additonal person, with other production factors held constant
Reservation wage
job seeker will not accept jobs if pay is below a certain wage, no matter how attractive other job aspects
pay level
refers to the average of the array of rates paid by an employer
External competitiveness
refers to the pay relationships among organizations- the organization's pay relative to its competitors
Shriking
screwing around
Quoted price market
stores that label each item's price or ads that list a job opening's starting wage are examples of what market?
marginal revenue of labor
the additional revenue generated when the firm employs one additional person, with other production factors held constant
Segmented labor supply
uses multiple sources of one kind of job, form multiple locations, with multiple employment relationship
