Chapter 7

Question 1

The pay relationships among organizations; focuses attention on the competitive positions reflected in these relationships.

Answer 1

external competitiveness

Question 2

An average of the array of rates paid by an employer.

Answer 2

pay level

Question 3

Relative emphasis among compensation components such as base pay, merit,
incentives, and benefits

Answer 3

pay mix

Question 4

labor costs =

Answer 4

pay level x number of employees

Question 5

The basic cash compensation that an employer pays for the work performed. Tends to reflect the value of the work itself and ignores differences in individual contributions.

Answer 5

base wage

Question 6

The complete pay package for employees, including all forms of money, bonuses, benefits, services, and stock.

Answer 6

total compensation

Question 7

Stores that label each item’s price or ads that list a job’s opening starting wage

Answer 7

quoted price

Question 8

allows haggling over terms and conditions until an
agreement is reached.

Answer 8

bourse

Question 9

The additional output associated with the employment of one additional
human resource unit, with other factors held constant.

Answer 9

marginal product of labor

Question 10

The additional revenue generated when the firm employs one additional
unit of human resources, with other factors held constant

Answer 10

marginal revenue of labor

Question 11

The employment level organizations require.

Answer 11

labor demand

Question 12

Economic theory that attributes the variety of pay rates in the external labor
market to differences in attractive as well as negative characteristics in jobs. Pay differences must overcome negative characteristics to attract employees

Answer 12

compensating differentials

Question 13

A theory that explains why firms are rational in offering higher-than-necessary
wages

Answer 13

efficiency-wage theory

Question 14

avoid or neglect

Answer 14

shirking

Question 15

The analysis of utility, the dollar value created by increasing revenues and/or
decreasing costs by changing one or more human resource practices. It has most
typically been used to analyze the payoff to making more valid employee
hiring/selection decisions.

Answer 15

utility theory

Question 16

The ability of a firm to meet employee wage demands while remaining
profitable; a frequent issue in contract negotiations with unions.

Answer 16

ability to pay

Question 17

a return (profits) received from activities that are in excess of the minimum (pay level) needed to attract people to those activities

Answer 17

rent

Question 18

A theoretical minimum standard below which a job seeker will not accept an offer, no
matter how attractive the other job attributes.

Answer 18

reservation wage

Question 19

An economic theory proposing that the investment one is willing to make
to enter an occupation is related to the returns one expects to earn over time
in the form of compensation.

Answer 19

human capital

Question 20

A function of the discrepancy between employees’ perceptions of how much
pay they should receive and how much pay they do receive.

Answer 20

pay satisfaction

Question 21

Those employers with which an organization competes for skills and
products/services.

Answer 21

relevant markets

Question 22

A wage structure that is set to match market rates at the beginning of the plan year only. The rest of the plan year, internal rates will lag behind market rates. Its objective is to offset labor costs, but it may hinder a
firm’s ability to attract and retain quality employees.

Answer 22

lag pay-level policy

Question 23

The view that a firm’s external wage competitiveness is just one facet of its overall human resource policy and that competitiveness is more properly judged on overall
policies. Challenging work, great colleagues, or an organization’s prestige must be factored into an overall consideration of attractiveness.

Answer 23

employer of choice

Question 24

An external competitiveness policy that offers employees substantial choice
among their pay forms.

Answer 24

shared choice

Question 25

argues that when factors of production are held constant, each additional worker is less productive than the last one hired.

Answer 25

Marginal productivity theory