Basis of wage claims, Managerial Economics

Assignment Help:

The Basis of Wage Claims

The union's demand for higher wages is normally based  on one or more of the following four arguments:

1. The cost of living argument

This is the commonest argument in that rising prices mean a fall in real incomes.  Thus trade unions demand higher wages so that the workers can maintain their present living standards.  It is important, however, that when trade unions use this argument they should also ensure that the productivity of the workers also increases.  This is because if wages increase while productivity does not, this will mean higher costs of production for the firm and this will lead to higher prices and more wage demands leading to a wage price spiral.  Thus, in addition to demanding higher wages, trade unions will also demand conditions, which go towards increasing the efficiency of labour.  These are:

a.        Motivating factors which boost the morale of workers like free or subsidized housing, free medical benefits, paid maternity leave, and paid sick leave.

b.       Safe and hygienic working conditions

c.        In-Service training or study leave to up-date the skills of workers

d.       Efficient co-operating factors like efficient machinery and tools.  Here, however, they must be careful because if the machinery is too efficient it may actually displace labour.

2. The productivity argument

Productivity is measured in terms of output per worker.  If this increases, workers can claim higher wages with the argument that their efficiency has increased.  This argument is justified if  it can be proved that productivity has increases as a result of the increased efficiency of workers, e.g. through less absenteeism and less idle talking.  However, if productivity increases as a result of the installation of new machinery, the benefits should go to the investor.

The argument of productivity can only be used in cases where the output of the firm can be measured.  Where output cannot be used, e.g. it is difficult to measure the productivity of civil servants.  In some cases productivity can fall due to factors beyond the control of the workers, and salaries of the workers cannot be reduced e.g. the efficiency of traffic police can fall due to increased traffic, but this does not mean that police should have reduced salaries.

3. The profit argument

If firm profits increases, workers can claim to have a share in them on the basis that they contributed to the increase.  This argument is justified if it can be proved that the increase in profits is due to increased efficiency of the workers.  If, for example, it is due to increased investment in advertising by the firm, the benefits should go to the investor.

4. The differential argument

This argument is justified if the two firms have the same profit level and if the efficiencies of the workers in the two firms are the same.  Otherwise it is not justified.


Related Discussions:- Basis of wage claims

Find the profit maximizing output and monopoly profit, The demand curve for...

The demand curve for the product of a monopolist is a straight line such that quantity just falls to zero at a price of Rs 20 per unit and that the maximum quantity (at zero price)

Concept of isocost, The concept of isocost In the use of resources, fi...

The concept of isocost In the use of resources, firms are faced with opportunity cost.  For every addition of say capital, they must forego a unit of say labour. Expositio

Discuss profit maximizing model in detail, Question 1. Discuss the practic...

Question 1. Discuss the practical application of Price elasticity and Income elasticity of demand Question 2. Discuss profit maximizing model in detail Question 3. Descr

What are the methods of managerial economics, What are the Methods of Manag...

What are the Methods of Managerial Economics The process of managerial economics deals with aspects of economics and tools of analysis, which are employed by business enterpri

Short-term policies to cure balance of payment deficits, Short-Term Policie...

Short-Term Policies Deflation is a policy of reducing expenditure with the intention of curing a deficit by reducing the demand for imports.  This reduction of expenditure m

Case let, Is Indian companies running a risk by not giving attention to cos...

Is Indian companies running a risk by not giving attention to cost cutting?n..

Essay, Help with writing papers and analysis for case "The Ready-To-Eat Bre...

Help with writing papers and analysis for case "The Ready-To-Eat Breakfast Cereal Industry" in 1994

Theory of consumer behavior, • Budget constraint, budget line, budget set, ...

• Budget constraint, budget line, budget set, Budget constraint is a very important concept in economics and is utilized even in advanced economic theory. Let the competent tutors

The results of the hypothesis test, Use the data set cd costs2010 to estima...

Use the data set cd costs2010 to estimate the marginal cost of one more CD. (Regress costs on the number of CDS.) Test the hypothesis that the marginal cost equals 75 cents. How wo

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd