Reference no: EM132161597

Global Hubcap is a maker of automobile hubcaps that serves all global automakers from its headquarters on the shores of Lake Huron. Manufacturing supervisors are important employees at Global Hubcap. A supervisor’s most important responsibility is training shop-floor workers. This training is done each June, as the firm shifts production over to a new model year’s hubcap designs. At the end of the training period (June 30 each year), every manufacturing team must pass a skills assessment, which is a test designed to tell whether the supervisor’s training program was successful. Supervisors are expected to work hard during this training period. If the supervisor works hard to train his/her manufacturing team, then the team passes the test with probability 1. If the supervisor shirks this important responsibility, then it is still possible that the team passes the test. However, the poor training is likely to result in hard-to-identify defects in the firm’s products - even if the team passes the test. These defects are likely to result in quality problems for the firm down the road, as its hubcaps age. Global Hubcap fires a supervisor immediately if his/her team fails the skills test. Fired supervisors typically are able to hire on quickly as manufacturing workers with a local rival at a wage of $20 per hour. Any supervisor whose team passes the test will keep his or her job - at least until the following June 30 when another training period and test rolls around. Training and preparation for training is costly and difficult for supervisors. Supervisors will work hard at this important training task if and only if doing so results in annual compensation that is higher by at least $1040. Question: Sally Jones is a long-time Global Hubcap supervisor. She is currently 58 years old, and has also announced an intention to retire at age 60. Hence, the upcoming training period is expected to be her second-to-last last. Global Hubcap wants Jones to work hard training both this year and next year. What must Jones’s hourly wage be over the period from June 30, 2019 to June 30, 2020 in order to motivate her to work hard in the June 2019 training period?