Question

1) Explain external competitiveness.

2) What are the factors that influence decisions on pay level and pay mix?

3) What are the basic assumptions of labor market theories?

4) What is the significance of marginal revenue?

5) According to efficiency-wage theory, how do increased wages increase efficiency and lower labor costs?

Answer 1

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Here we will discuss the five different cases which are down below.

CASE 1:- EXTERNAL COMPETITIVENESS:- External competitiveness can be described as, the capability of the companies or the organizations of handling their employees in the means of paying them or in monetary terms. The external competitiveness can be measured when a company or a firm pays its employees. The following term as being described by the example:- The employees will choose to work in a company that will pay them the most in comparison to the competitors prevailing in the market.

CASE 2:- There can be many factors that can influence the decisions on the pay level and pay mix. The pay of the wages would be given to the employees Based on their performance are the number of units they produced at the workplace. Many factors that influence the decision regarding the pay level and pay mix such as, employers' affordability which means how many employers can afford to pay its employees.

CASE 3:- There are various basic assumptions of a labor market theory. The assumptions are made to make sure that, there's a reality check regarding the theory. Some assumptions which are made such as, the wages are not at all rigid and can be changed according to the work of the performance of the employees. The workers can be a substitute for each other when there are a shortage of workers. There should be e constant way of motivating employees by providing them the monetary benefits.

CASE 4:- The significance of marginal revenue is that it is really helpful in increasing the profitability of the organization, when applied properly. It is that gain or the profit which comes from selling one extra unit of the product. The marginal revenue is very helpful in any organization, more of the selling is done in the organization, more of the marginal revenue will be accumulated in the organization.

CASE 5:- According to the efficiency wage theory, it is proved that increased wages would definitely lead to an increase in efficiency and lowering labor costs. It is because that, increased wages would definitely motivate the employees to work efficiently, which would ultimately lead to the decrease in the labor turnover, and labor turnover is very helpful in the lowering the labor cost. The work will also work efficiently and give their 100% at the workplace.