SummaryCh06 - S u m m ar y Nonwage benefits, such as paid...

Info iconThis preview shows page 1. Sign up to view the full content.

View Full Document Right Arrow Icon
Summary • Nonwage benefits, such as paid vacations, pen- sions, and other social insurance contributions, account for almost 40 percent of labour compensa- tion.While this is more complicated than the sim- ple “wage” that we use as the price of a unit of labour, the complexity of compensation may not affect the validity of the labour demand model. For example, if nonwage benefits are strictly propor- tional to the wage, the distinction is not important. However, nonwage benefits are often complex functions of the number of employees and hours worked. • Many of these compensation costs are “quasi-fixed” in that they are incurred once a worker is hired (possibly recurring annually), but do not change with the number of hours worked. Other labour costs, such as hiring, training, and firing costs, are also “quasi-fixed.” • The fact that some costs do not increase propor- tionately with hours worked drives a wedge between the marginal cost of hiring an additional worker (the extensive margin) and working an
Background image of page 1
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 02/05/2011 for the course ECON 3240 taught by Professor Noordeh during the Winter '11 term at York University.

Ask a homework question - tutors are online