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Chapter 23: Problem 6

In which of the following cases is it more likely for efficiency wages to exist? Why? a. Jane and her boss work as a team selling ice cream. b. Jane sells ice cream without any direct supervision by her boss. C. Jane speaks Korean and sells ice cream in a neighborhood in which Korean is the primary language. It is difficult to find another worker who speaks Korean.

Short Answer

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A. Jane and her boss work as a team selling ice cream. B. Jane sells ice cream without any direct supervision by her boss. C. Jane speaks Korean and sells ice cream in a neighborhood where Korean is the primary language, and it is difficult to find another worker who speaks Korean. Answer: B and C

Step by step solution

01

Case A: Jane and her boss work as a team selling ice cream.

In this situation, Jane and her boss work closely together, so the boss can monitor her performance and productivity. As a result, it might be less likely for efficiency wages to exist, since the employer can ensure productivity through direct supervision.
02

Case B: Jane sells ice cream without any direct supervision by her boss.

In this case, Jane works independently, and her boss has less direct control over her effort and productivity. Employers might choose to pay efficiency wages in this situation to motivate employees to work harder and reduce the need for direct supervision. This scenario is more likely to involve efficiency wages compared to Case A.
03

Case C: Jane speaks Korean and sells ice cream in a neighborhood where Korean is the primary language. It is difficult to find another worker who speaks Korean.

In this case, Jane has a unique skill (speaking Korean) that is in high demand for the job. Since finding another worker with the same skill is difficult, her employer might be willing to pay efficiency wages for two reasons: firstly, to retain Jane and reduce turnover; and secondly, to motivate her to provide better service to customers since she can communicate effectively with them. This scenario is also likely to involve efficiency wages. To conclude, it is more likely for efficiency wages to exist in
04

Case B: Jane sells ice cream without any direct supervision by her boss

and
05

Case C: Jane speaks Korean and sells ice cream in a neighborhood where Korean is the primary language, and it is difficult to find another worker who speaks Korean

. In both cases, efficiency wages can serve as a motivation tool and a way to retain valuable employees who have unique skills or work without direct supervision.

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Most popular questions from this chapter

Each month, usually on the first Friday of the month, the Bureau of Labor Statistics releases the Employment Situation Summary for the previous month. Go to www.bls.gov and find the latest report, On the Bureau of Labor Statistics home page, at the top of the page, select the "Subjects" tab, find "Unemployment," and select "National Unemployment Rate." You will find the Employment Situation Summary under "CPS News Releases" on the left-hand side of the page. How does the current unemployment rate compare to the rate one month earlier? How does the current unemployment rate compare to the rate one year earlier?

In each of the following situations, what type of unemployment is Melanie facing? a. After completing a complex programming project, Melanie is laid off. Her prospects for a new job requiring similar skills are good, and she has signed up with a programmer placement service. She has passed up offers for low- paying jobs. b. When Melanie and her co-workers refused to accept pay cuts, her employer outsourced their programming tasks to workers in another country. This phenomenon is occurring throughout the programming industry. c. Due to the current slump, Melanie has been laid off from her programming job. Her employer promises to rehire her when business picks up.

How will the following changes affect the natural rate of unemployment? a. The government reduces the time during which an unemployed worker can receive unemployment benefits. b. More teenagers focus on their studies and do not look for jobs until after college. c. Greater access to the internet leads both potential employers and potential employees to use the internet to list and find jobs. d. Union membership declines.

In general, how do changes in the unemployment rate vary with changes in real GDP? After several quarters of a severe recession, explain why we might observe a decrease in the official unemployment rate. Explain why we could see an increase in the official unemployment rate after several quarters of a strong expansion.
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