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Comp.- Internal Equity

Comp.- Internal Equity - Job Value and Economic Theory 1...

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Job Value and Economic Theory 1
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Role of Theory Basis for practice Helps understand practice “Nothing is as useful as a good theory” If you believe “X”, what would you do? 2
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Job Value and Economic Theory Classical Theory Just price Labor theory of value Smith Marx Demand/Supply Theory Market exchange model 3
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Job Value and Economic Theory (continued) Demand Side Theory Marginal revenue product Thurow’s job competition model Elliott Jacques 4
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Job Value and Economic Theory (continued) Supply Side Theory Labor scarcity models Monopsony Employee preferences Collective bargaining Human capital models Labor capacity models 5
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Job Value and Economic Theory (continued) Structural theory Organizational hierarchy Tournament theory 6
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Just Price Theory Value is derived from status of occupation in society Social values thus impact job value Economic contribution is insufficient basis for job value Basis for comparable worth arguments How would compensation manager apply just price theory? 7
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Labor Theory of Value - Smith Commodities gain value according to amount of labor required to produce them Labor value not just a matter of hours, but Hardship or unpleasantness Difficulty of learning the job Stability of employment Responsibility or trust inherent in the job Chances of success or failure inherent in the work 8
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Labor Theory of Value - Marx Labor is the sole source of value in an economy Difference in wage and full value created by labor is surplus exploited by capitalists as profits Exchange rate (i.e., market rate) not adequate measure of value but merely reflects sustainable level 9
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