CHAPTER 7
______________ is typically associated with greater profits
Efficiency wage theory
Compensating differentials theory says that paying above market wages will lead to workers with higher ability.
False
External competitiveness is primarily determined by the impact of government regulations on the firm or industry.
False
Job applicants who will not accept a job that pays below a certain level are acting according to signaling theory
False
Signaling theory argues that higher wages leads to greater efficiency.
False
Stores that label each item's price or ads that list a job opening's starting wage are examples of bourses.
False
The first assumption of labor market theories is that employers always seek to maximize penetration.
False
The most influential theory explaining pay-level differences is marginal revenue productivity.
False
The product market sets the floor on the minimum wage required to attract sufficient numbers of employees.
False
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.
_____________relationships between employer size and its ability to pay: talented individuals have a higher marginal value in a larger organization, talented people can influence more people and decisions, and influence of talented people leads to more profits
TRUE
A lead policy may force the employer to increase wages of current employees too, to avoid internal misalignment and murmuring.
True
According to efficiency-wage theory, paying higher wages than competitors lowers labor costs due to more efficient workers.
True
An employer offering lower base pay with high bonuses is likely signaling they are seeking risk-taking employees.
True
An individual manager could be a factor affecting an employer's external competitiveness.
True
Both pay level and pay mix decisions focus on two objectives: (1) control costs and increase revenues and (2) attract and retain employees.
True
Combat pay premiums paid to military personnel offset some of the risk of being fired upon is an example of a lead pay-level policy.
True
Employers in highly competitive markets are less able to raise prices without loss of revenues.
True
Graduating students usually find themselves in a quoted-labor market.
True
Human capital theory assumes that people are paid at the value of their marginal product.
True
In a labor market, the demand side focuses on the actions of the employers.
True
In a labor market, the market rate is where the lines for labor demand and labor supply cross.
True
In determining the compensation strategy, a major strategic decision is whether to mirror what competitors are paying.
True
In practice, organizations use skills and competencies to assess value of labor instead of marginal revenue product.
True
It is likely that workers act in accordance with reservation wage theory with respect to both wages and benefits.
True
Marginal productivity theory argues that when factors of production are held constant, each additional worker is less productive than the last one hired.
True
Marginal revenue is measurable and used by managers to determine both pay levels and how many employees to hire.
True
Other things being constant, in a hiring scenario, the employer will continue to hire until the marginal revenue generated by the last hire is equal to the costs associated with employing that person.
True
Signaling theory applies to both the demand and supply side.
True
Talented individuals have a higher marginal value in larger organizations.
True
The three factors usually used to determine the relevant labor markets are the occupation, geography, and competitors.
True
There is no single "going rate" in the labor market for a specific job.
True
Wages in labor-intensive industries are generally lower than in technology intensive industries.
True
What is an example of a quoted-price?
a product on Amazon
Among pay-mix alternatives, ____________is largest in security or commitment.
base pay
Reasons a company might ______________ wages above market competitors: employees are more productive, turnover will be lower, and to attract more job applicants
base pay
The total compensation for a top athlete is an example of a __________.
bourse
An example of a situation where data from labor market competitors would be given more weight than product market competitors' data is when the supply of labor is responsive to _________________
changes in pay
Consequences of level of ________________ of total compensation include increased probability of union-free status, reduced voluntary turnover, and reduced pay-related work stoppages.
competitiveness
Pay level offered by an employer is an example of the _________________
demand side of labor
Rent sharing is most commonly associated with the efficiency wage theory.
efficiency wage theory
The theory that has the most implications for staffing is the ______________
efficiency wage theory
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 marginal revenue of the last hire is ___________ to the wage rate for that hire.
equal
All of the following shape _______________: nature of demand, industry strategy, and level of product demand.
external competitiveness
Factors affecting an employer's ability to pay __________ include product demand, degree of competition, and productivity of labor.
high wages
The _____________theory is the most influential in explaining pay-level differences.
human capital
The pay policy associated with increased productivity is the _________________
hybrid policy
Employers continue to hire until marginal revenue of the last hire equals their wage rate, because as per the first _______________ assumption employers seek to maximize profits.
labor market theory
A pay policy most likely to reduce pay dissatisfaction is ___________
lead
Advantages of a _____________ policy include reduced turnover, reduced absenteeism, and higher financial performance.
lead pay
The assumption of the upward sloping supply curve may not hold when unemployment is ___________
low
Wages tend to be ___________ in the education and health care industries.
low
Evidence shows that in ____________, productivity is positively correlated with hourly wage level
manufacturing
Output associated with hiring an additional person, holding constant other production factors, is referred to as the ________________.
marginal product of labor
Important factors in defining a __________ for compensation purposes include skill/knowledge required, product acceptance, and product and/or labor market competitors.
market
The _____________ is the point at which supply and demand lines cross.
market pay rate
The most common pay policy is __________
match
The study referred to in the text on how managers make wage adjustment decisions found profitability affected the _______________
overall pay budget
______________refers to the average of the array of rates paid by an employer.
pay level
_______________have a significant impact on expenses. Other things being equal, the higher the pay level, the higher the labor costs.
pay level decisions
The ___________ component in which benefits is likely to be largest is work-life balance.
pay-mix
The ___________ sets a maximum pay level an employer can pay.
product market
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
___________________ involves hiring from different sources, paying workers differently that are performing the same work, and employing regulars, part-timers, and temps.
segmented labor supply
If Company A and Company B pay the same total compensation for a job, which of the following is most likely true?
the pay mix differs
The _______________ supports the idea that coal mining should be paid more than office clerical work?
theory of compensating differential
Considering the _________________, although some firms find lowering the job requirements and hiring less-skilled workers a better choice than raising wages, this choice incurs increased training costs.
third assumption of labor market theory
Research on efficiency wage theory shows that more _____________ workers apply
unqualified