Question

True/false/ambiguous. For each of the following, indicate whether the statement is true, false, or ambiguous, and briefly explain your answer. If your answer depends on any assumptions, state them clearly. Use graphs or equations to illustrate your answer whenever it is helpful.

11. In efficiency wage models, employers take the market wage as given, and then choose the level of effort at which employees are required to work.

12. Mandatory retirement only makes sense in a delayed compensation (or underpayment-overpayment) model of earnings

13. In negotiating a salary with your employer, you should always try to get the highest salary possible – that is, the salary just below the level at which the employer would choose not to hire you. Otherwise you are leaving money on the table.

14. Workers are willing to invest in increasing their specific human capital as long as they capture all the economic returns to that investment.

15. If the economic return to school is due to signaling rather than human capital investment, then the private return to schooling is higher than the social return.

Answer 1

11. Efficiency wage model points to the managers to pay their employees more than the market-wage to increase the efficiency of the employees and hence the statement is false.

12. Mandatory retirement by the organization to its employees is to ensure the productivity efficiency with pay of scale. Even if the employee is normal paid and after certain years,not so much productive then it will not be efficient for organization.Hence, statement is false.

13. When employee negotiates for salary with the employer, the arguing factor should be salary justifiable to the work performed and considering other benefits offered. Some employer although pays little less but they provide many other benefits.So, getting always the highest salary should not be the benchmark for salary negotiation.Hence, statement is false.

14. Investing in specific human capital is not an option after considering all the economic returns from that investment. It also depends on the other benefits that give comfort to the workers. Hence, the statement is false.

15. This statement is not true considering the fact that good education not only comes from private institution. There are public owned schools also that provides good education. Hence, it is the quality and mentality of students bundled with school can make difference.