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Explain: 'My employer doesn't determine my salary; he determines where I work.'

1. Explain the following qutation: "My employer doesn't determine my salary; he determines where I work."

2. In the basic competitive model, why do employees pay for general training and firms pay for specific training?

3. Why do firms form internal labor market?

4. Evaluate the following statement: "Firms are free to set salaries in any manner they want in an internal labor market."

5. Present an economic argument to explain why firms often have mandatory retirement (where allowed by law).

6. Ho do influence costs affect pay within internal labor market?

Solution Preview

1. Explain the following quotation: "My employer doesn't determine my salary; he determines where I work."

There is an internal labor market in which pricing and allocation of labor is governed by a set of administrative rules and procedures. Different jobs receive different levels of compensations and compensations are based on the skills. There are rules to determine these salaries based on different skills, so the employer determines the employee's workplace and responsibilities. When he determines this, the workers' salary would be automatically determined by these rules and procedures. Of course the employers have freedom to determine wages but they are under the pressure of competitive forces in the labor market.

2. In the basic competitive model, why do employees pay for general training and firms pay for specific training?

Because the employees are responsible to get the general training about their area, which determines their profession. On the other hand firms are responsible to give the specific trainings to fit this training to their ...

Solution Summary

In a 656 word cited solution, each question is answered in a paragraph of several sentences.

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