The topics discussed in this chapter are labour demand, nonwage benefits, and quasi-fixed costs. In this chapter, students will be able to understand: Nonwage benefits, hours of labour, payroll taxes, labour decisions in economic downturns, creating more jobs.
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Chapter Six
Labour Demand,NonWage Benefits, and Quasi-
Fixed Costs
Created by: Erica Morrill, M.Ed
Fanshawe College
Trang 3Pay for Time WorkedPay for Time Not Worked
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Quasi-Fixed Labour Costs
Independent of the number of hours worked
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Nonwage Benefits vs Wages
Why wouldn’t employees prefer wages over nonwage benefits?
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Nonwage Benefits vs Wages
Employer’s benefits
layoffs and accidents
production
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Quasi-Fixed Labour Costs
Variable Labour costs
Quasi-fixed
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Quasi-Fixed Labour Costs
Given the quasi-fixed costs:
increase labour input
becomes more costly
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Quasi-Fixed Costs
Firms try to:
employees
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General Effect of Quasi-Fixed Costs
relative to MC of working an existing worker longer hours
employment and toward working more hours
additional future revenues = the present value
of additional costs
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N VMPt(1+r) t
VMPt6.2
Profit-Maximizing Employment Rule
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W 0
N
VMP
N 1 0
VMP 1
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W 0
N
VMP VMP 1
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Reducing Barriers to Employment Sharing
Premiums based on hourly earnings
with a ceiling based on hourly earnings
Prorating contributions according to
hours worked
Subsidizing employment sharing
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End of Chapter Six