Topic 7_ Labor Markets

docx

School

Ashford University *

*We aren’t endorsed by this school

Course

BUS660

Subject

Economics

Date

Jan 9, 2024

Type

docx

Pages

Uploaded by PinkkFriday08

2 My goal is that they may be encouraged in heart and united in love, so that they may have the full riches of complete understanding, so that they may know the mystery of God, namely, Christ, 3 in whom are hidden all the treasures of wisdom and knowledge. 4 I tell you this so that no one may deceive you by fine-sounding arguments. ...Col2:2-4 Objectives: 1. Analyze how firms make hiring decisions and how equilibrium wages are determined in the labor market. 2. Analyze imperfections in the labor market and how they affect wages and employment. 3. Determine how to structure incentives, such as wages or other compensations, to maximize employee effort and align workers’ objectives with those of the firm. 4. Determine the effects of moral hazard and the principal-agent problem on the employee and employer relationship. DQ1 Give examples from your employment history where you witnessed moral hazard in the workplace. What were the incentives that gave rise to moral hazard? Did the firm take steps to eliminate moral hazard? The increase in risky or unfavorable behavior following a contract is referred to as a moral hazard. One instance that comes to mind from previous employment is how, after their probationary period, employees start to call in sick to work, particularly on the weekends. Employees started to notice a pattern of how newer employees started calling in, leaving the organization short-staffed. They knew they wouldn't get in trouble since they were past their probationary period. Because they knew they would have extra work responsibilities, the other employees would call in sick. The company tried to implement some changes, such as providing lunch or some other kind of reward for employees working on the weekends, after realizing that the number of call-ins increased on the weekends. They implemented a shift differential for any shifts worked on the weekends after realizing that didn't work. Although it didn't completely solve the issue, fewer employee calls were in. Once the employee became a permanent team member, the organization had little control because the union was there to protect them. If you were a permanent employee and a union member, there weren't many incentives to work harder. Therefore, the company would restrict the employees' ability to work overtime to try and encourage better behavior on their part. To make more money, employees were always eager to put in extra time. However, the overtime would need to be approved by the employee's manager. Employees were not permitted to work overtime if they were lazy and did not finish their work during regular business hours. Some employees changed after the company put this requirement into place. It is challenging to completely eradicate moral hazard

in any organization, regardless of the incentive. DQ2 Begin by locating a scholarly article regarding the effects of increases on minimum wages and discuss its findings. Does a minimum wage increase lead to reductions in employment, or is the overall effect on employment net positive? Do you agree or disagree with the results of the study? What do you think are other vital considerations that should be taken into account in the study? Discuss how conscious capitalism would approach a minimum wage increase. Provide examples to support your rationale. Recently, the US labor market has experienced more turmoil than at any time in recent memory. Some service industry jobs experience a decline in employment as a result of minimum wage increases. In the article that was written, it was discussed how risky it would be to raise the minimum wage during the pandemic we are currently experiencing. I concur with the article that an increase in the minimum wage at this time would be detrimental to employment. Smaller businesses wouldn't be able to survive. Many of them are still working to recover from the blow that business closures caused. Since sales increased during the pandemic, some larger companies, like Amazon, can keep up. Instead of going to the store, more people are now making their purchases online. The article also discussed how McDonald's could pay its employees more, but that expense would be borne by customers. In order for McDonald's to keep up with wage increases, prices for goods increased. I do concur that raising the minimum wage should take place gradually to protect jobs. Employers will have to eliminate jobs if they are unable to keep up with the increase. Recently, I've observed how many businesses have shifted more toward self-service kiosks, and I also saw a robot server at a restaurant. Although I acknowledge the necessity of wage increases, I also believe that inflation is a result of quick changes. I think that an ethical form of capitalism would gradually raise the minimum wage. All of the stakeholders in conscious capitalism are taken into account. Therefore, it would need to think about how it would affect its customers. The more sensible course of action would be to gradually raise prices for consumers while also gradually raising wages for its workers. Ip, G. (2021, March 3). A Pandemic May Be a Risky Time for a Higher Minimum Wage. Wall Street Journal. https://www.wsj.com/articles/a-pandemic-may-be-a-risky-time-for-a- higher-minimum-wage-11614792712 Responses 7.1-The concept of "moral hazard" first appeared in the insurance industry, and it is largely based on the fact that each party has varying knowledge of a given circumstance—more specifically, varying knowledge of the true level of risk. The problem with inaccurate or unfair information is that it does not come from both sides. In any business setting, but particularly when taking out insurance, such a problem is risky. Knowing that the insurance will pay for any risks taken, the party purchasing insurance intends to act in a way that benefits them the most. Because the information would typically lead to either higher premium requirements or the inability to obtain the insurance policy, the information is typically not given to the insurance company. Reference: CFI Team. (2020, May 19). Moral Hazard. Corporate Finance Institute.

https://corporatefinanceinstitute.com/resources/economics/moral-hazard/ Response 7.1 The subject of moral hazard is broad and touches on many economics-related topics. Moral hazard is frequently referred to as the principal-agent problem in the workplace. Here, the business owner (the principal) is unable to fully appreciate the fruitful efforts of his employee or manager (the agent). As a result, a flat-rate of compensation for employment, when combined with asymmetric information, may encourage the employee to avoid or underperform. A moral hazard typically arises when the agent has more knowledge about their actions than the principal. This enables the agent to modify their actions in order to capitalize on the principal's ignorance. Considering that she/he will be paid equally regardless of how well he performs, they can work diligently in his own best interest rather than fully pursuing the owner's best interests. Reference: EconPort - Moral Hazard. (2023). Www.econport.org. https://www.econport.org/content/handbook/Unemployment/Comparing/MoralHazard.ht ml

Your preview ends here

Eager to read complete document? Join bartleby learn and gain access to the full version

Access to all documents
Unlimited textbook solutions
24/7 expert homework help

Related Documents

2021 Midterm 1 - Blank.pdf

Problem Set 4.pdf

Problem Set 6.pdf

ECON 304 HW 8.docx

0.+Exam+1+-+ECO+391+-+Fall+2022+%28Q%26A%29+42+questions+UPLOADED.docx

Angie Copy of Q4-Online Demand Course.docx

Topic 2_ Foundations Of Economics - Costs And Decisions.docx

Assignment_4_Micro_UMASS_Fall2023.pdf

BUS4070_u06a2.docx

72e5b89e-723f-448e-908d-a99713249eee_quiz_question_review.pdf

MATH-1410 Notes 2.4_shelton.docx

ACFI3006期中考2022S2.docx

Recommended textbooks for you

Principles of Economics 2e

Economics

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:OpenStax

ECON MICRO

Economics

ISBN:9781337000536

Author:William A. McEachern

Publisher:Cengage Learning

Essentials of Economics (MindTap Course List)

Economics

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Brief Principles of Macroeconomics (MindTap Cours...

Economics

ISBN:9781337091985

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Principles of Economics (MindTap Course List)

Economics

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:Cengage Learning

Principles of Microeconomics (MindTap Course List)

Economics

ISBN:9781305971493

Author:N. Gregory Mankiw

Publisher:Cengage Learning

SEE MORE TEXTBOOKS

Recommended textbooks for you

Principles of Economics 2e
Economics
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:OpenStax
ECON MICRO
Economics
ISBN:9781337000536
Author:William A. McEachern
Publisher:Cengage Learning
Essentials of Economics (MindTap Course List)
Economics
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Brief Principles of Macroeconomics (MindTap Cours...
Economics
ISBN:9781337091985
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Economics (MindTap Course List)
Economics
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:Cengage Learning
Principles of Microeconomics (MindTap Course List)
Economics
ISBN:9781305971493
Author:N. Gregory Mankiw
Publisher:Cengage Learning