compensation chapter 7

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

What are the specific examples of the demand side of labor?

Competition in the labor market for people with various skills; Competition in the product and service markets, which affect the financial condition of the organization; and characteristics unique to each organization and its employees.

Supply of skilled workers<IS NOT> a factor that affects an employer's ability to pay high wages.

Factors that do affect are product demand, degree of competition, and productivity of labor.

According to efficiency-wage theory, how does increased wages increase efficiency and lower labor costs?

High wages may increase efficiency and lower labor costs if they: • Attract higher-quality applicants • Lower turnover. • Increase worker effort

If Company A raises its pay rate one dollar per hour to hire additional workers and competitors immediately match the increase, what is the most likely result?

Higher labor costs for Company A, but not more workers.

Which of the following is not true of the relationship between employer size and its ability to pay?

Talented people prefer to work in larger organizations.

Describe which is true regarding efficiency wage theory research?

That more unqualified workers apply.

Is a product advertised on Amazon an example of a quoted-price?

Yes; stores that label each item's price or ads that list a job opening's starting wage are examples of quoted price markets. You cannot name your own price when ordering from Amazon.

Rent sharing is most commonly associated with the

efficiency wage theory.

The theory that has the most implications for staffing is

efficiency wage theory.

Employers continue to hire until marginal revenue of the last hire equals their wage rate because as per the first labor market theory assumption

employers seek to maximize profits.

1. The mix or forms of pay compared to competitors is a part of

external competitiveness.

4. Pay level decisions have a significant impact on expenses. Other things being equal, the higher the pay level,

higher the labor costs.

Segmented labor supply involves

hiring from different sources, paying workers differently who are performing the same work, and employing regulars, part-timers, and temps.

the ____ theory is the most influential in explaining pay-level differences.

human capital

40. The pay policy associated with increased productivity is the

hybrid policy.

The study referred to in the text on how managers make wage adjustment decisions found

profitability affected the overall pay budget.

Implication of the _____theory is that pay level affects an employer's ability to recruit.

reservation wage

In ______ theory, pay is described as non-compensatory

reservation wage

If a friend told you they would not accept a job after graduating for less than $50,000 per year, they would be demonstrating the

reservation wage theory.

The market pay rate is the point at which

supply and demand lines cross.

Output associated with hiring an additional person, holding constant other production factors, is referred to as

the marginal product of labor

The assumption of the upward sloping supply curve may not hold when

unemployment is low

A study of graduating college students found they sought jobs with all the following pay characteristics except _____ individual based pay.

variable pay

2. Grades and interview skills<ARE NOT> a factor explaining differences in pay offered to graduating college students?

Because offers vary form company to company. Location has an effect, work also has an effect: jobs in employment pay a little less than jobs in compensation and employee relations. The industry to which the different firms belong has an effect.

Which theory supports the idea that coal mining should be paid more than office clerical work?

Compensating differentials

______ theory is typically associated with greater profits.

Efficiency wage

Wages tend to be low in which of the following industries?

Education and health care.

______ theory is most useful for explaining variations in pay mix

Efficiency wage

1. Briefly explain the external competitiveness.

It refers to the pay relationships among organizations-the organization's pay relative to its competitors. Looks at comparisons outside the organization, comparisons with other employers that hire people with the same skills. It is expressed in practice by (1) setting a pay level that is above, below, or equal to that of competitors; and (2) determining the mix of pay forms relative to those of competitors.

According to your text what items shape external competitiveness?

Labor market factors: nature of demand, nature of supply. Product market factors: degree of competition, level of product demand. Organization factors: industry, strategy, size, and individual manager.

Is ability to pay an important factor in defining a market for compensation purposes.

No, these are the important factors: skill/knowledge required, product acceptance, and product and/or labor market competitors.

____ refers to the average of the array of rates paid by an employer.

Pay level

A small lawn care company has two mowers and four employees. If it hires another employee, how productive will productivity of the fifth employee compare to the current two employees?

Productivity reduces

6. Competitor production costs are lower<IS NOT> a reason a company might pay base wages above market competitors?

Reasons to pay wages above market competitors: employees are more productive, turnover will be lowered, and to attract more job applicants.

Does an above-market wage guarantee a better workforce?

Research shows that higher wages do attract more qualified applicants. But higher wages also attract more unqualified applicants. Few companies can claim that they choose only superior applicants from the larger pool. So, an above-market wage does not guarantee a more productive

_______ is the basis for the sorting effect pay strategy has on the composition of a workforce.

Signaling theory

What are the factors that affect decisions on pay level and mix?

The factors include (1) competition in the labor market for people with various skills; (2) competition in the product and service markets, which affects the financial condition of the organization; and (3) characteristics unique to each organization and its employees. These factors act in concert to influence pay-level and pay-mix decisions.

39. In which of the following would data from labor market competitors be given more weight than product market competitors data?

The supply of labor is responsive to changes in pay

What explains the upward sloping supply under the human capital theory?

The theory assumes that people are in fact paid at the value of their marginal product. Improving productive abilities by investing in training or even in one's physical health will increase one's marginal product. Consequently, jobs that require long and expensive training should receive higher pay than jobs that require less investment. As pay level increases, the number of people willing to make that investment increases, thereby creating an upward-sloping supply.

____ is an example of a bourse.

The total compensation for a top athlete

T/F If Company A and Company B pay the same total compensation for a job and the pay mix differs.

True

Research on efficiency wage theory shows that

more unqualified workers apply

the ____ sets a maximum pay level an employer can pay

product market

Evidence shows that in manufacturing, ______is positively correlated with hourly wage level.

productivity