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Hiring and Productivity

Most firms require labor to produce output. The number of workers to hire is often an important decision of the firm because it affects the costs and profits of the firm. Write on the following issues:

1. Suppose you are the manager of the firm. What advice would you give the owners to raise the productivity of its labor? Be specific in your proposal.

2. What if the government raised the minimum wage. How would this policy affect your firm?

3. Use the readings from the background page. In general, do you think the government should intervene in the market?

Solution Preview

This is a very broad question, and I'm not quite sure what you need help with, so I'm going to sketch out some ways to approach this question that might help you when you are writing this paper.

1. Labor productivity can be raised in many ways, including:
- application of new technology - workers using computers for data processing are much more efficient than those using punch cards or typewriters. By investing in new technology, the output per worker can be increased. This works across many industries, and in some industries a shift towards technology can save labor costs (for example, a robot that can do the work that used to be done by 20 men saves the salaries of
those 19 workers).
- application of new techniques (education) - if workers learn new skills or new techniques that save time and cost on production, this too increases labour productivity. For this reason, many firms have either in-house training programs ...

Solution Summary

This solution explores the effects of government raising the minimum wage, as well as ways for managers to explore the manner in which they can raise labor productivity. Finally, it concludes with a look at the pros and cons of government intervention in the market.