Question

Workers don’t like the risk of death or injury on the job, and they also don’t like the risk of being laid off. Sketch a worker’s job choice in a market that pays a compensating wage differential for the risk of layoff.

Answer 1

Workers don’t like the risk of death or injury on the job, :-

Some Jobs are riskier, more dangerous, and have a greater likelihood of injury. For example, coal miners, deep sea divers, and security guards.

Some jobs have more distant, or hard to reach locations. Firms in cities that have high living costs, inhospitable climates, high crime rates, or other "disamenities" so worker dont like the risk of death or injury on the job.

An area with a lower cost-of-living should be more attractive than areas with an expensive cost-of-living. Unfortunately, it is difficult to measure within countries cost-of-living

layoff:-   layoff referred exclusively to a temporary interruption in work, or employment but this has evolved to a permanent elimination of a position in both British and US English,

Laid off workers or displaced workers are workers who have lost or left their jobs because their employer has closed or moved, there was insufficient work for them to do, or their position or shift was abolished Downsizing in a company is defined to involve the reduction of employees in a workforce

The fear of job (in layoff condition) loss refers to the felt threat,  stress, and perceived powerlessness due to the possibility of leaving the current job and being not hired in the labor market.  Fear as such generates  anxiety and lowers the well-being of workers and even their dependents.

so, Find it necessary to offer higher wages to attract workers.

The idea of compensating differentials has been used to analyze issues such as the risk of future unemployment, the risk of injury, the risk of unsafe intercourse, the monetary value workers place on their own lives.

As long as workers have complete information about the risks and hazards of a job and are free to choose between different employers, then compensating wage differentials are allocatively efficient. This is important in terms of government worker safety regulations--primarily undertaken by the Occupational Safety and Health Administration

A compensating wage differential :-

A compensating differential, is defined as the additional amount of income that a given worker must be offered in order to motivate them to accept a given undesirable job, relative to other jobs that worker could perform.

Different wages paid to different workers or in different markets that adjust for differences in the jobs or in the productivity of the workers. Wage differentials occur for many reasons. Quite often they are the result of the personal preferences of workers. In some cases workers are willing to "buy" leisure-time or other types of household production by taking lower wages. Differences in job risks, education, and location are also reasons for the persistence of wage differentials.

The extra wage it must pay to attract workers is called a compensating wage differential because the higher wage is paid to compensate workers for the undesirable working conditions.

Wage differential calculation:-

1. Straight Time = Total Hours x Hourly Rate. ...
2. Third-Shift Premium = Total Hours Worked on that Shift x Shift Differential Rate. ...
3. Total Compensation = Straight Time Pay + Shift Premium Pay + Any Other Compensation. ...
4. Regular Rate = Total Compensation ÷ Total Hours.
5. Overtime Pay = RR x 0.5 x OT Hours
6. Total Gross Pay (before taxes) = Total Compensation + Overtime Pay

Lay off compensation is equal to 50% of basic salary and dearness allowance. It is payable to all employees who have completed at least one year of service with the company. Total of 240 days of work including paid holiday, paid leaves and leaves due to employment injury shall constitute a year of service. read more at: Right to lay off is not a common right available in all cases which can be exercised in difficulties but it is restricted to such situations, like, inability of employer to give employment to workmen due to shortage of raw materials, power, accumulation of stock, break down of machinery or natural calamity.