Above equilibrium wages paid by firms in order to

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- above equilibrium wages paid by firms in order to increase worker productivity o States that such a constrain on firms is unnecessary in many cases because firms may be better off keeping wages above the equilibrium level Four types way firms would want to pay high wages: 1. Worker Health Better paid workers eat a more nutritious diet, and workers who eat a better diet are healthier and more productive Not relevant for firms in rich countries such as Canada Concern over nutrition may explain why firms do not cut wages despite a surplus of labour 2. Worker Turnover The more a firm pays its workers, the less often its worker will choose to leave Wants to decrease turnover because it is costly for firms to hire and train new workers Newly hired workers are not as productive as experienced workers 3. Worker Effort Firms monitor the efforts of their workers, and workers caught shirking their responsibilities are fired High wages make workers more eager to keep their jobs, giving workers an incentive to put forward their best efforts 4. Worker Quality When a firm pays a high wage, it attracts a better pool of workers to apply for its jobs and thereby increases the quality of its work force Henry Ford and the Very Generous $5-A-Day Wage Henry ford created the assembly line in which unskilled worker were taught to perform he same simple tasks over and over again Back then $5 was twice the daily rate and long lines of job seekers formed outside the For factories Turnover fell, absenteeism fell and productivity rose So much more efficient that Ford’s production costs were lower even though wages were higher Workers organized in an assembly line are highly interdependent If one worker is absent or works slowly, other workers are less able to complete their own tasks
Raised the importance of low worker turnover, high worker quality and high worker effort Chapter 10 – The Monetary System Without money people would have to rely on barter for what they want, for instance you would have to offer the restaurateur something of immediate value Economy that relies on barter will have trouble allocating its scarce resources efficiently Double coincidence of wants – the unlikely occurrence that two people each have a good or service that the other wants
As money flows from person to person in the economy, if facilitates production and trade, thereby allowing each person to specialize in what he or she does best and raising everyone’s standard of living The Meaning of Money Money – the set of assets in an economy that people regularly use to buy goods and services from other people If you owned a company, you would be wealthy, but this asset is not considered a form of money (can’t buy a meal or a shirt) Money includes only those few types of wealth that are regularly accepted by sellers in exchange for goods and services The Functions of Money

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