Compensation Test 3
Which of the following statistical measures shows how similar or dissimilar the market rates are from each other?
Standard deviation
Which of the following is NOT true of the relationship between employer size and its ability to pay?
Talented individuals have a lower marginal value in a larger organization.
All of the following are important factors in defining a market for compensation purposes EXCEPT:
The ability to pay
If Company A raises its pay rate by one dollar per hour to hire additional workers and competitors immediately match the increase, what will be the most likely result?
The labor costs for Company A will increase, but it will be unable to hire additional workers.
_____ is the additional output associated with the employment of one additional person, with other production factors held constant.
The marginal product of labor
Which of the following jobs would most likely fall into a fuzzy market?
The position of Senior Director of Future Vision Services that was filled by a software engineer with e-commerce, marketing, and theater experience
All of the following are examples of potential anomalies EXCEPT _____.
a large variation in average base pay for a job across companies
Because employers are raising employee pay at various times during the year, survey data must be updated using a process called _____ or _____.
aging;trending
A common first step in interpreting survey data is to _____.
check for the accuracy of job matches
The second major decision in pay-level determination is to _____.
define the purpose of a survey
The final major decision in pay-level determination is to _____.
design grades and ranges or bands
Employers continue to hire until the marginal revenue of the last hire equals his or her wage rate. This is based on the first labor market theory assumption that
employees seek to maximize profits.
All of the following are advantages of a lead pay-level policy EXCEPT _____.
higher turnover rates
The _____ theory is the most influential in explaining pay-level differences.
human capital
Pay level decisions have a significant impact on expenses. Other things being equal, the higher the pay level, the higher the:
labor costs.
The pay policy that is most closely associated with the decreased ability to attract employees is a(n) _____ policy.
lag
The pay-level policy that is most likely to reduce pay dissatisfaction is a(n) _____.
lead policy
Aging the market data to a point halfway through a plan year is called _____.
lead/lag
A market pay line
links a company's benchmark jobs with market rates paid by competitors
A company using a skill-based pay system prices the job of lead assembler between $10 and $22 per hour. Survey data showed that the job of assembler averaged $10 per hour and the job of assembly supervisor averaged $22 per hour. The company is using the _____ method of job matching.
low-high
For organizations using a skill-competency-based pay system or generic job descriptions, the best approach for pricing jobs is _____.
low-high approach
In a hiring situation, considering that other potential costs will not change in the short run, the level of demand that maximizes profits is that level at which the _____ of the last hire is equal to the _____ for that hire.
marginal revenue;wage rate
The _____ pay strategy emphasizes external competitiveness and deemphasizes internal alignment.
market pricing
The most common pay policy is a(n) _____.
match policy
The _____ minimizes the distortion of the central tendency caused by outliers.
median
Size of pay differentials between grades should _____.
support career movement through the pay structure
The process of multiplying survey data by some factor judged to reflect the difference between a survey benchmark job and a company job is called _____.
survey leveling
In most organizations, the responsibility for managing a pay survey lies with _____.
the compensation manager
The assumption of the upward sloping supply curve that offers of higher pay will increase supply will most likely NOT hold when _____.
unemployment is low
A study of graduating college students found they sought jobs with all of the following pay characteristics EXCEPT _____.
variable pay
In the regression equation, y = a + bx, job evaluation points are denoted by _____.
x
Pay ranges for office and production work commonly range between _____ and _____ percent.
5;15
Which of the following is an example of a company that uses broad banding?
A company in which there is more lateral movement with no pay adjustment than promotions
The _____ publishes extensive information on various occupations in different geographic areas. It is a major source of publicly available compensation data.
Bureau of Labor Statistics
Druk Inc. is a consulting firm with 10 employees. Each new client generates $10,000 in revenue. If the company hires another employee who brings in five new clients and all other factors of production are constant, which of the following statements is true?
Druk needs to pay $50,000 as wage to the eleventh employee to break even.
Wages tend to be the lowest in which of the following industries?
Education and health care
Which of the following is an example of a bourse market?
Flatcake, a website that allows buyers to negotiate the prices with the sellers of handmade goods
Gramhold Inc., a pharmaceutical company, reduces its 10 salary grades to just three broad bands. Which of the following statements is most likely to be true in this case?
Gramhold will experience career moves within bands more than career moves between bands.
Which of the following is true regarding the Employment Cost Index (ECI)?
It allows comparison of changes in its average costs to an all-industry average.
Which of the following is an example of a quoted-price market?
Nile, a website that allows sellers to sell their products for a fixed price
_____ refers to the average of the array of rates inside an organization.
Pay level
Which of the following statements is true of pay level?
Pay level is directly proportional to labor costs.
In which of the following conditions would product market competitors' data be given more weight than data from labor market competitors?
Product demand is responsive to price changes.
Which of the following is often used to set pay ranges?
Quartiles and percentiles
_____ puts a lid on the maximum pay level an employer can set.
The product market
A small lawn care company has two mowers and four employees. If it hires another employee and the factors of production remain the same, how will the productivity of the fifth employee compare to that of the current four employees?
The productivity will reduce.
_____ is an example of a bourse.
The total compensation for a top athlete
Which of the following statements is true about market pricers?
They assume that little value is added through internal alignment.
Which of the following statements is true regarding broad bands?
They foster cross-functional growth.
Which of the following is NOT a reason a company might pay base wages above market?
To increase turnover rates
_____ measures reveal competitors' use of performance-based cash payments.
Total cash
A survey conducted in January 2013 found that the median pay effective January 1, 2013, for a clerk was $22,000 and that the forecast rate of wage increases in the market for 2013 was 5 percent and another 5 percent for 2014. An employer choosing to follow a lead strategy of 4 percent above the market for the plan year will need to _____.
multiply the salary by 105 percent and then by 109 percent
The market pay rate is the:
point at which supply and demand lines cross.
Evidence shows that in manufacturing, _____ is positively correlated with hourly wage level
productivity
Pay ranges:
reflect the differences in performance or experience that an employer wishes to recognize with pay.
Among pay-mix alternatives, the percentage of base pay is highest in _____.
security or commitment policy
The first step in setting competitive pay and designing a pay structure is to _____.
specify a pay-level policy
