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Midterm Compensation Management > Ch 7 *Ashley DONE > Flashcards

Ch 7 *Ashley DONE Flashcards

1
Q

How is external competitiveness achieved?

A
  1. Setting a pay level that is above,below or equal to that of competitors
  2. determine the mix of pay forms relative to those of competitors
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2
Q

What is pay level?

A

Pay level refers to the average of the array of pay rates paid by an employer.

Calculation: Base+incentive pay+benefits+ value of equity/# of employees.

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3
Q

What is a pay form?>

A

refers to the mix of various types of compensation, or pay mix that make up total compensation.

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4
Q

How to determine labour costs?

A

Number of employees X Pay level

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5
Q

What shapes external competitiveness?

A

Labour market factors, product market factors, organizational factors

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6
Q

what are the labour market factors?

A

Nature of demand

nature of supply

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7
Q

What are the product market factors?

A

Level of product demand

Degree of competition

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8
Q

Organizational factors are?

A

Industry and technology
employee size
employees preferences
organization strategy

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9
Q

How Labor Markets work

A
  • employers always seek to maximize profits
  • people are homogeneous and therefore interchangeable
  • pay rates reflect all costs associated with employment
  • the market faced by employers are competitive
  • the market rate is where the lines for labor demand and labor supply cross.
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10
Q

What is marginal product of labour?

A

It is the additional output associated with employment of one additional person, with other production factors held constant.

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11
Q

What is diminishing marginal productivity?

A

Each additional employee has progressively smaller share of the other factors of production with which to work.

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12
Q

T or F: An employer’s demand for labor coincides with the marginal product of labor?

A

True.

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13
Q

What is marginal revenue?

A

The additional revenue generated when the firm employs one additional person, with other production factors held constant.

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14
Q

A manager using the marginal revenue product model must do what?

A
  1. determine pay level set by market forces.

2. determine marginal revenue generated by each new hire.

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15
Q

Economic theories must frequently be revised to account for reality when…

A

when focus changes from all the employers in an economy to a particular employer.

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16
Q

What is an issue for economists when modifying the demand side?

A

Question is posed: why would an employer pay more than what theory states is the market-determined rate?

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17
Q

What are the 5 labour demand theories?

A
  1. compensating differentials
  2. efficiency wage
  3. signalling
  4. reservation wage
  5. human capital
18
Q

what is the prediction for compensating differentials?

A

work with negative characteristics requires higher pay to attract workers.

19
Q

what is the prediction of the efficiency wage?

A

above-market wages will improve efficiency by attracting workers who will perform better and be less willing to leave.

20
Q

What is the prediction for signalling?

A

Pay policies signal the kind of behaviour the employer seeks.

21
Q

what is the prediction for reservation wage?

A

Job seekers will not accept jobs when pay is below a certain wage, no matter how attractive other job aspects are.

22
Q

what is the prediction for human capital?

A

The value of an individuals skills and abilities is a function of the time and expense required to acquire them.

23
Q

Product Demand

A

Puts a lid on maximum pay level an employer can set

24
Q

Degree of competition

A

In highly competitive markets, employers are less able to raise prices without loss of revenues

Single sellers are able to set whatever price they choose.

25
Q

A segment labor supply involves what?

A

-Multiple sources of employees from multiple location with multiple relationships.

26
Q

level and mix of cash and benefits paid depends on what?

A

the source

27
Q

T or F people flow to the work

A

true.

28
Q

What does segmented sources of labor mean?

A

that determining pay levels and mix requires understanding market conditions in different locations

29
Q

what do managers need to know in segmented supplies of labor and going rates?

A
  • Jobs required to do the work
  • tasks to be performed
  • knowledge and behaviors required to perform them.
30
Q

What are the 4 organizational factors?

A
  • industry and technology
  • employer size
  • employees’ preferences
  • organizations’ strategy
31
Q

T or F labor-intensive industries tend to pay lower than technology intensive industries?

A

true

32
Q

T or F Large organizations tend to pay less than small ones

A

False

Large organizations tend to pay more.

33
Q

T or F markets involve employers’ and employees’ choices

A

True

34
Q

T or F higher pay levels may be well suited to particular strategies such as higher value-added customer segments

A

True

35
Q

what are the 3 factors that determine relevant labor markets?

A

Occupation, geography and competitors

36
Q

How do employers choose their relevant markets?

A

Based on:

  • competitors (products,location and size)
  • jobs (skills and knowledge required and their importance to org success)
37
Q

Data from market competition are likely to receive greater weight when:

A
  • Employee skills are specific to the product market
  • labor costs are a large share of total costs
  • product demand is responsive to price changes
  • supply of labor is not responsive to changes in pay
38
Q

What are the three conventional pay-level policies?

A

to lead
to meet (match)
to follow competition (lag)

39
Q

New policies emphasize flexibility among:

A

policies for different employee groups

40
Q

4 pay-mix strategies

A
  1. performance driven
  2. market match
  3. work/life balance
  4. security
41
Q

Employees may vary policies for:

A
  • different occupational families
  • different forms of pay
  • different business units
42
Q

T or F: There is no going rate, conscious pay decisions are made by managers

A

True

Midterm Compensation Management (7 decks)

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