Chapter 3 Flashcards
(55 cards)
Wages
Paid hourly or weekly it is a variable cost to a firm
Salary
Paid monthly as a fixed amount
Piece rate
Fixed amount per unit produced however workers tend to focus on quantity rather than quality
Commission
Percentage value of goods or services sold
Bonus
Extra sum of money paid to workers who produce above standard amount of finish ahead of time
Overtime pay
Payment workers work excess of standard working hours
Non-wage Factors
Just wish we picked juice instead for lunch
- Job satisfaction
- working conditions
- working hours
- pension
- Job security
- Education and training
- fringe benefits
- Location
How are wages determined
By supply and demand of labor
Factors leading to shifts in demand for labor
DPC
- increase in demand
- Increase in productivity
- High price of capital
Factors leading to shift in supply of labor
FTFNUM
- fall in labor force
- increased length of training
- low fringe benefits
- Better Nonwage factors in other occupations
- Rise in unemployment benefits
- occupational and geographical immobility
What gives workers the ability to negotiate for increased wages
Strong bargaining power
- if labor or members in a trade union with high power
- if labor have high skill due to education and more experience
- if there is high demand for goods and services produced
Advantages of setting minimum wage above equilibrium
- Increase labor productivity
- more labor supply as incentive to work increases
- aggregate demand increases so firms hire more labor and produce more output leading to economic growth
Disadvantages of setting national minimum wage above equilibrium
- unemployment increases as firms demand less labor and they may replace them for machines
- Workers who are an above national minimum wage may ask for a wage increase to maintain wage difference so cost of production increase
Why skilled earn more
- low supply is they require more education and training
- High demand due to high productivity and cannot be replaced by machines
Why unskilled labor may earn more
- increase demand for goods and services
- maybe members of a trade union
- Unskilled may be working in a developed country
Why male may earn more
- Female work part time
- Female take Career breaks to have children so less promotion
- females may accept low paid jobs to have more flexible hours
- discrimination against female
Why females may earn more
Females in developed countries have high paid jobs and are well educated, May Post pone having children for career prospects
Why public sector may offer more wages
- High demand for public sector goods
- low supply of labor in public sector so higher wages
- private sector may offer longer holidays and shorter working hours
- High degree of danger so may be compensated with higher wages
Private sector May earn more
They offer high paid because public sector offers more job security and high pension
-Seek profit maximization someone to attract skilled labor that are more productive
Why primary sector and secondary sector may earn more
- High demand on goods and services produced
- workers can be members of trades union
- have more experience than Fresh graduate in service sector
- maybe working in a developed country with high standard of living
Why Tertiary sector may earn more
- Low supply due to high use of education and training
- High demand on labor due to high productivity and can’t be replaced by machines
Specialization of labor
Concentration on a particular task this occurs when work becomes an expert in a certain profession
Division of labor
Occurs when the production process is split the tasks and workers specialize in one task only
Why specialization Will lower average cost of firms
- workers specialize in what they are best at and repetition of the task would increase productivity
- Workers between more quickly and cheaply in one task only
- workers do not have to move from one job to another so time is saved
- reduces wastes
- Firms can use machine and labor so productivity increases
