Lecture 8 2-9-2012 - 151 lecture 2-9-2012 Labor Demand:...

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151 lecture 2-9-2012 Labor Demand: Quasi-Fixed Labor Costs (QFLs) Quasi-fixed costs are costs that vary with the number of workers hired by the firm, but not with the hours worked per employee. 1. Introduction: is labor a fixed or a variable cost? What’s at stake? a. Basis for a theory of long-term employment relations b. Blend of fixed and variable costs 2. Types and magnitudes of QFL’s (nonwage labor costs) a. Hiring, training, separation costs, severance pay, overall replacement costs: these are mostly up-front investments that generate returns later . b. Employee benefits— these are ongoing costs , which are based upon headcount rather than an individual’s total hours worked. 3. Application Headcount/hours tradeoff theory, for determining overtime, part-timers versus full-time workers. 4. Labor Demand and Economics of Training 1
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a. Types of training: general vs. specific and classroom vs. OJT b. General training: why do firms provide general training? c. Firm-specific training: Do firms in the U.S. provide enough training? 2
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1. Introduction to QFL Costs: What is at stake? a. So far, the LD model has looked at labor only as a variable cost As if employees can be added or subtracted without friction or consequences for productivity. But labor is different from other inputs. b. Some labor costs are fixed, not variable . -- In many U.S. company’s annual reports, CEO’s write: our employees are our most important asset. The term asset could imply ownership of the asset, or it could be an investment-- with a time pattern of costs up front and returns later. -- One hears the same statement from Japanese managers. Japanese managers said they would not show their employees the door when demand for the company’s product declined. -- In the U.S., it used to be standard to hear about the importance of holding onto skilled and valuable workers during recessions. Business cycle researchers referred to this group as overhead workers who were not subject to layoffs. 3
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c. Determinants of fixed versus variable components of workforce Microeconomic perspective Firms and workers can benefit from treating labor as an asset, although they also need some kind of buffer labor stock to absorb shocks and instability. Macroeconomic perspective
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This note was uploaded on 02/21/2012 for the course ECON 151 taught by Professor Staff during the Spring '08 term at University of California, Berkeley.

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Lecture 8 2-9-2012 - 151 lecture 2-9-2012 Labor Demand:...

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