* `CH. 7 External Competitiveness: What does this refer to? The pay relationship among organization… how do they stack up? *Pay Level refers to the average pay paid by employees for the same job. * Take a certain job and create a job survey; you can survey company around your area and your employee range. Price setEx:
Why do we care?* Employers want to control cost and attract employees. *How much we pay has an ability to attract ppl
Why did AT&T and Ma bell have a 99.9% percentile pre 1984 ma bell 99.9% percentile customers
MCI }
Sprint } Competition
What determines external competitiveness?
Bourse ( ppl with specific talents that are in demand, high CEO’S, SPCIAL INDEMAND SKILLS) vs Quoted price(regular pay): ex. Football players, coaches, singers
Market Theory: employers seek to:
Maximize profit:
Human Resource are Interchangeable:
Pay Rates reflect all costs:
No advantage to pay above or below the competition:
When supply and demand cross that sets the market price. You find out your market wage, everyone should pay the market wage.
Look at the marginal product of labor: for additional output associated with employing and additional employee. MPL: What difference btw the first person and second person produces.
Look at the Marginal Revenue of Labor: the additional revenue generated by an additional employee.
Firm: How many to hire? (MARKERT RATE)
You need to stop hiring when a person is not making any revenue for you.
EXPLAIN HOW BASIC ECONOMIC THEROY GETS SET AND WHAT IT TELL THE FIRM: IT SAY THAT THE MAKRET SETS THE WAGE, THE WAGE IS WHERE THE SUPPLY MEETS THE DEMAND, THE ONLY QUESTION THE FIRM NEEDS TO ANSWER IS HOW MANY PPL THEY NEED TO HIGH AT THAT WAGE. THEY DO IT BY LOOKING AT MRL. * Companies have a choice. * Is all HR interchangeable? False it does matter. * Pay Rates reflect all cost? Ex. Microsoft-attracts stock options. We have more then pay rates. Different types of compensation incentives, overhead, benefits.
3 Theory’s base on labor demand, explanations, Labor supply explanations
ORG: 1st. Labor demand: organization says we can pay more or pay less because of this:
Compensating Differentials: ADAM SMITH came up with it, he said that because of something about this job either because where you do it or how is done you need to pay more or less. Ex. Linda and her red arms being a dishwasher at an Italian Restaurant they pay more because of the orange arms. Ex. Oil rigs: pay more because it is a dangerous job, even if you are an accountant. You need to pay more because of the negative aspect of this job.
Efficiency Wage Theory: AT&T was paying 99.9% because they thought they were getting the cream of the crop. You can attract the best, keep the best , you need fewer supervisors (lower cost), higher productivity ( work harder + better) you can pay more and get higher productivity and need less ppl with a higher wage you are more efficient. Linda( YES, you can attract the best if you have a good high ring process, do you keep the best yes, lower supervision depends on the person, higher productivity (do ppl work higher because they are paying more it will only last only so long) need for fewer workers maybe. )
Signaling Theory: the company is paying more or less to signal the importance of a job. Ex. P&G pays more to marketing to signal what is important, AT&T pays 99.9 percentile to engineers signal what is important to them.
(Potential Employees) 2ND Labor Supply:
Reservation Wage: we all have a bottom line minimum, a lot of the time they come from what we hear. The market might set the wage but if they ppl has a higher reservation wage we need to accommodate so we can get ppl . ( I should get pay more because I wont go for less than that)
Human Capital Theory: because it differences in what individuals can offer the employers, they expect different wages, the person feels like the deserve more. ( I deserve more)
Job