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