Question

Explain how firm and workers " match and mate" or " marry" each other in the labour market when there are many types of jobs offering various levels of risk to the worker.

(a) Explain in detail what the slope of the hedonic wage function measure?

Part (a) is a question on it's own.

Answer 1

                                    A market is always an important factor in an economy where firms and the workers meet to achieve a common goal. The meeting provides the firms with the right amount of working strength for production and gives the workers the monetary strength to sustain their lives. But the major feature of a market is that it offers a wide variety of jobs ranging from daily wage workers to CEO’s. The work range varies according to one’s potential, need and qualification. Thus, in a market various firms offering various work models have the opportunity to come across many people who are in need of job. The following are the ways in which a firm identifies the right potential worker and a worker in turn identifies the most beneficial job in a market

· At first, the firms would outline a business plan and sets the number of workers required for the optimal and efficient functioning of the firm at various levels of operation.

· The next step is to identify potential workers from the market. For that, the firm would use many methods like interview calls, advertising, mass recruitments etc depending on the type of worker in need.

· In each of these methods of recruitment, the firm sets a particular standard and process method so that proper screening of the individual is being done which would result in recruitment of the right individual.

· The working population in response to the advertisements or job calls would do a proper analysis of the firm requirement to take decisions as to which firm would suite the individual.

· After identification of the right firm, the individual would apply for the post with all the requirements required for the same.

· The identification of the firm includes various analysis of which risk analysis of the job is an important one. Once the job risk is more and the worker decides to choose it, the firm would have to bear additional costs so as to compensate for the risk undertaken by the worker.

· Many methods of analysis like analysis with the hedonic wage function could be used to identify the same. Its slope gives the relation between wage and job characteristics.

· Workers utility function is given by

Utility = f(w, risk of injury)

ie; to provide same utility, risky jobs must provide more wages than safer jobs

· The trade off between work and the risk preference of the worker can be obtained from the indifference curves.

· The market compensation differential equates the supply and demand and give the bribe required to attract the last worker hired by a risky firm

· After this step, both the firms and the working class meets and it is after this that the firms would opt for the above said recruitment process

· Once the recruitment process gets over the worker becomes the part of the firm and the firm imparts proper training so as to make the worker industrially efficient.

(a)                               

                                           A hedonic wage function refers to a function that gives the relationship between wages and the job characteristics. This can be used to match different workers with different risk preferences with different firms that matches these different risk preferences. The slope of the hedonic wage function gives the wage increase offered by a slightly riskier job.