econ112811 - Microeconomics November 28, 2011 TA MAILBOXES:...

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Microeconomics November 28, 2011 TA MAILBOXES: 8 th Floor Thompson Problem Set 3 due Tuesday, December 13 th . Wages, Marginal Revenue Products, and Efficiency Wages Does efficiency cause wages or do wages cause efficiency? The Big Ideas - In the orthodox model, productivity determines wages because employers hire whenever MRPL > Wage. In the efficiency-wage approach, wages determine productivity. - “High Road” like Ford in building the Model T, pay higher wages to get workers to be attentive, diligent, and to work hard. We could encourage companies to act like this by mandating higher wages. - If there are both “high road” and “low road” companies, there will be a queue for jobs. o companies with high wages workers more productive queue for jobs The Big Problem: Getting work out of your workers - Capitalists hire workers for a certain time. - They profit if the work produced in this time exceeds the wage paid – “surplus value”. Management is about getting people to work hard. Other issues are technical: - Engineering: coordinating production and choosing right tools and technology. - Sales. - Coordinating cash flow. You win by raising Output above the wage. Output/Hour = Output/(Minute Worked) * (Minute Worked) / Hour First is “productivity”: you need good engineers. Second is “labor intensity”: you need to motivate your workers. Business School is not engineering school because it is about motivation. Henry Ford and the $5 day
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This note was uploaded on 04/04/2012 for the course ECON 103 taught by Professor Voorheis during the Fall '08 term at UMass (Amherst).

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econ112811 - Microeconomics November 28, 2011 TA MAILBOXES:...

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