Ch 7 *Ashley DONE

Question 1

How is external competitiveness achieved?

Answer 1

1. Setting a pay level that is above,below or equal to that of competitors
2. determine the mix of pay forms relative to those of competitors

Question 2

What is pay level?

Answer 2

Pay level refers to the average of the array of pay rates paid by an employer.

Calculation: Base+incentive pay+benefits+ value of equity/# of employees.

Question 3

What is a pay form?>

Answer 3

refers to the mix of various types of compensation, or pay mix that make up total compensation.

Question 4

How to determine labour costs?

Answer 4

Number of employees X Pay level

Question 5

What shapes external competitiveness?

Answer 5

Labour market factors, product market factors, organizational factors

Question 6

what are the labour market factors?

Answer 6

Nature of demand

nature of supply

Question 7

What are the product market factors?

Answer 7

Level of product demand

Degree of competition

Question 8

Organizational factors are?

Answer 8

Industry and technology
employee size
employees preferences
organization strategy

Question 9

How Labor Markets work

Answer 9

• employers always seek to maximize profits
• people are homogeneous and therefore interchangeable
• pay rates reflect all costs associated with employment
• the market faced by employers are competitive
• the market rate is where the lines for labor demand and labor supply cross.

Question 10

What is marginal product of labour?

Answer 10

It is the additional output associated with employment of one additional person, with other production factors held constant.

Question 11

What is diminishing marginal productivity?

Answer 11

Each additional employee has progressively smaller share of the other factors of production with which to work.

Question 12

T or F: An employer’s demand for labor coincides with the marginal product of labor?

Answer 12

True.

Question 13

What is marginal revenue?

Answer 13

The additional revenue generated when the firm employs one additional person, with other production factors held constant.

Question 14

A manager using the marginal revenue product model must do what?

Answer 14

1. determine pay level set by market forces.

2. determine marginal revenue generated by each new hire.

Question 15

Economic theories must frequently be revised to account for reality when…

Answer 15

when focus changes from all the employers in an economy to a particular employer.

Question 16

What is an issue for economists when modifying the demand side?

Answer 16

Question is posed: why would an employer pay more than what theory states is the market-determined rate?

Question 17

What are the 5 labour demand theories?

Answer 17

1. compensating differentials
2. efficiency wage
3. signalling
4. reservation wage
5. human capital

Question 18

what is the prediction for compensating differentials?

Answer 18

work with negative characteristics requires higher pay to attract workers.

Question 19

what is the prediction of the efficiency wage?

Answer 19

above-market wages will improve efficiency by attracting workers who will perform better and be less willing to leave.

Question 20

What is the prediction for signalling?

Answer 20

Pay policies signal the kind of behaviour the employer seeks.

Question 21

what is the prediction for reservation wage?

Answer 21

Job seekers will not accept jobs when pay is below a certain wage, no matter how attractive other job aspects are.

Question 22

what is the prediction for human capital?

Answer 22

The value of an individuals skills and abilities is a function of the time and expense required to acquire them.

Question 23

Product Demand

Answer 23

Puts a lid on maximum pay level an employer can set

Question 24

Degree of competition

Answer 24

In highly competitive markets, employers are less able to raise prices without loss of revenues

Single sellers are able to set whatever price they choose.

Question 25

A segment labor supply involves what?

Answer 25

-Multiple sources of employees from multiple location with multiple relationships.

Question 26

level and mix of cash and benefits paid depends on what?

Answer 26

the source

Question 27

T or F people flow to the work

Answer 27

true.

Question 28

What does segmented sources of labor mean?

Answer 28

that determining pay levels and mix requires understanding market conditions in different locations

Question 29

what do managers need to know in segmented supplies of labor and going rates?

Answer 29

- Jobs required to do the work - tasks to be performed - knowledge and behaviors required to perform them.

Question 30

What are the 4 organizational factors?

Answer 30

- industry and technology - employer size - employees' preferences - organizations' strategy

Question 31

T or F labor-intensive industries tend to pay lower than technology intensive industries?

Answer 31

true

Question 32

T or F Large organizations tend to pay less than small ones

Answer 32

False Large organizations tend to pay more.

Question 33

T or F markets involve employers' and employees' choices

Answer 33

True

Question 34

T or F higher pay levels may be well suited to particular strategies such as higher value-added customer segments

Answer 34

True

Question 35

what are the 3 factors that determine relevant labor markets?

Answer 35

Occupation, geography and competitors

Question 36

How do employers choose their relevant markets?

Answer 36

Based on: - competitors (products,location and size) - jobs (skills and knowledge required and their importance to org success)

Question 37

Data from market competition are likely to receive greater weight when:

Answer 37

- Employee skills are specific to the product market - labor costs are a large share of total costs - product demand is responsive to price changes - supply of labor is not responsive to changes in pay

Question 38

What are the three conventional pay-level policies?

Answer 38

to lead to meet (match) to follow competition (lag)

Question 39

New policies emphasize flexibility among:

Answer 39

policies for different employee groups

Question 40

4 pay-mix strategies

Answer 40

1. performance driven 2. market match 3. work/life balance 4. security

Question 41

Employees may vary policies for:

Answer 41

- different occupational families - different forms of pay - different business units

Question 42

T or F: There is no going rate, conscious pay decisions are made by managers

Answer 42

True