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Report on Human Resource Economics

   

Added on  2020-04-21

12 Pages2633 Words250 Views
Mechanical EngineeringCalculus and Analysis
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Running head: HUMAN RESOURCEE ECONOMICS Human Resource EconomicsName of the StudentName of the UniversityAuthor note
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1HUMAN RESOURCE ECONOMICSTable of ContentsIntroduction......................................................................................................................................2Literature review..............................................................................................................................2The theory of efficiency wage.....................................................................................................4Efficiency wage with labor market segmentation.......................................................................6Backward bending labor supply curve........................................................................................6Empirical evidence and practical applicability of efficiency wage.................................................7Recommendation and Conclusion...................................................................................................8References......................................................................................................................................10
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2HUMAN RESOURCE ECONOMICSIntroduction The factors used in production process earns a return. Labor is an important factor ofproduction and receives wage as remuneration. The forces of demand and supply in the labormarket generally determine the wage paid to the employees. The structure of wage andemployment is a crucial determinant of wage. Factors influencing the productivity of labor inprivate as well as in public have contested long. Wage is a primary influencing factor of laborsupply and productivity. A wage above the equilibrium wage generally creates an oversupply oflabor and hence unemployment. In the presence of strong bargaining power of union employersoften forced to set wage above the equilibrium wage. When employers pay wage aboveequilibrium wage to enhance productivity without any force then it is called efficiency wage.One contradictory theory of efficiency wage is that of the theory of backward bending laborsupply curve. The theory suggests, increases in wage increases labor supply to a certain level.Beyond that, point labor supply decreases as labor gives priority to leisure above their labor time.In this paper, the theory of efficiency wage is discussed and the relation between pay andperformance is analyzed. The issues are draw from relevant literature and related with laborpolicies of a well-established company in Australia.Literature review In literature, the structure of wage and differences in the prevailing wage level is widelydiscussed because of its long held implications on living standard of labors and productivity.With passes of time, the structure of wage and employment has changed in industries. Differentwage theories and models are proposed to explain the incidence of wage and examine thosetheories with some practical evidences.
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3HUMAN RESOURCE ECONOMICSThe theory of equitable wage is one of the important theories in literature of wagestructure. The theory suggests that existing poverty and inequality contributes to increasing wagegap among the labor force. The differences in wage here are explained with discrepancies in thejob profile, in firms’ structure, differences in economic condition and development status andcomposition of society (Schmitt, 2013). The equitable wage distribution is seen as a way ofmitigating inequalities in these countries. The theory has little to do with efficiency of workersand firms’ productivity and this opens a door to critic of this theory.Pay for performance model provides an argument for wage inequality on ethical ground.The high payment scheme gives worker incentive to give greater work effort and enhanceproductivity. Overtime the workers develop their skills as encouraged by the higher wages. Theskilled and good quality workers increase overall productivity of firms. Many literatures supportthe pay for performance model. This theory suggests when workers receive a high wage then animprovement in performance in realized. However the ability of the worker within firms differsand this difference in skills results in inequality in wage payment. Here wage is paid according titheir performance. The argument of this model is quite similar to the theory of efficiency wage. Scholars had devoted much of their time to explore wage several wage theories that exitin different economies. One such theory counters the proposed theory of equal wagedistribution. The counter arguments indicate that the theory of equal distribution of wages mayseem appealing from a social perspective of equality but it not economical at all (Coşar, Guner& Tybout, 2016). The equal wage reduces the incentives of additional work effort. In somesituation it is reasonable to exit an inequality of wage. There are some common trends of wageinequality that has proven beneficial for the firm as well as for the workers.
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