This website uses cookies to ensure you have the best experience. Learn more

Efficiency Wages Essay

656 words - 3 pages

Question: How would you solve the principle-agent problem in your company? Be specific and include at least four specific actions.
I began writing this essay with the idea I would use principal-agent problem examples from the firm I work for, but it quickly became a list of gripes, which I did not find conducive to the question at hand. Instead, I focused on providing suggestions for what I feel are the top four principal-agent challenges facing the firm I work for. They are as follow:

1. Based on the examples in this weeks lecture, I feel the firm I work for handles the principal-agent problem through “managing by intimidation”. This management approach creates extreme morale issues for the staff, as well as a great deal of stress to a workforce that already has very stress-full jobs. This approach seems counter productive within a firm that provides on-site services to customers, because the employees providing these services are obviously bitter and not providing the quality of work expected of them. However, I can understand their decision based on the fact we are all “remote” employees. This creates a large challenge for the firm to manage. They claim employees are taking advantage of the amount of time they actually work and expenses they incur in the field. The firm has instituted all sorts of remedies including tracking software on cell phones and laptops. All of these so-called remedies, although well intentioned, cost the firm a great deal of money to implement, support and creates a distrusting culture throughout the organization. In contrast to this management method, I would propose a more supportive approach; one that revolves around an “incentive pay plan”. This will be the basis for my final three answers.

2. The bonus and profit sharing approach seems like a far less expensive approach than managing by intimidation and would help align the interests of employees (Agent) with those of the...

Find Another Essay On Efficiency Wages

Winter Recess Project Essay

639 words - 3 pages jobs were indeed taken by the immigrants who were willing to hold jobs with low pay. Americans were also worried about losing its English influences, becoming a mixture of “inferior” Europeans. Immigration affected the industrial worker by causing uneasiness about job security, and worries regarding loss of English influence. Labor unions were created with the industrial worker’s well being and wages in mind. Although different unions rose, they

Living Wages Essay

1843 words - 7 pages Living Wages Introduction Over the past decade, politicians have sought to reform the national poverty levels by lobbying for what is frequently referred to as a living wage. Living wages, on the most elementary level, are the absolute minimum a person must make per year or per hour to stay above the federal poverty level. While the number of people that receive living wages is still small, Wood (2002) suggests that this is a trend

acemoglu and pischkie paper

1614 words - 7 pages invest in the the skills mix they need, which is specific, although each skill component is specific. Stevens (1994) argues that in practice skills are neither entirely specific not general but the mixture makes the outside market for workers non-competitive. She shows that firms may invest in the skills of their firms are general. MINIMUM WAGES AND UNIONS In line with Acemoglu and Pischke (1999b), efficiency wages stand for a first source of

Economics of Labor Unions

1042 words - 4 pages modeling union behavior is to assume that the union's goal is to maximize a well defined utility function of wages and employment. The union is assumed to maximize this objective function subject to constraints imposed by the employer. The economic efficiency between the employer and the union requires that employment be set at the level where the value of marginal product of labor equals the opportunity cost of an hour for workers. The union and

Miimum Wage and Power to the People

2172 words - 9 pages all fairness everyone should not be earning the some income, because many have made years of sacrifice to earn their current wages. However, there is not viable reason that workers cannot be paid enough to live without struggling month after month. The lower wage earners tend to feel unappreciated even though they are equal citizens under the U.S. Constitutional law. Accessing the Alternatives Power to the business - Efficiency, Effectiveness

Globalization, Efficiency and loneliness

1712 words - 7 pages , because their wages is low, to save money, factory people changing numbers constantly to take advantage of cheaper calling plans, and switching phone cards when crossing to another city to save the roaming fees.(100) And this causes them to lose touch with some people forever. In other words, because factories are only looking for efficiency in time and money in order to win a position in the globalization world, factories implemented many rules

The Correlation Between Unionization and Productivity

2168 words - 9 pages union and organization being forced to maximize utility by emphasis of the efficiency wage, which is defined as: a situation where management has a significant incentive to compensate employees with wages that are above the market average to increase productivity, efficiency and possibly even morale. (Floyd) This was discussed in paper written by Mark Pernecky from the University of Notre Dame who found that: although unemployment can increase

Economic Globalization and What the Government Can do about Poverty and Inequality through Jobs and Wages

1228 words - 5 pages policies are quite compatible with economic efficiency and economic growth.Bibliography"Globalisation, Jobs and Wages." ORGANISATION FOR ECONOMIC CO-OPERATION AND DEVELOPMENT. June 2007. Web. 4 Dec. 2009. .Grusky, David B., and Ravi Kanbur. Poverty and inequality. Stanford, Calif: Stanford UP, 2006. Print.Page, B., and J. Simmons. 2000. What Government Can Do: Dealing with Poverty andInequality. Chicago: University of Chicago Press.Royce, Edward Cary

Compensation Management: What is the role of compensation and rewards in modern organization? What are the advantages of a fair compensation system?

1242 words - 5 pages increasing employees' base pay without regard for the broader picture.Compensation takes the forms of wages and benefits. The pay structure consists of:•Wages which are a monetary payment for services performed on an hourly basis for specified quality of labor (blue-collar worker) either an employee or employer (working for someone else). Wage rate is usually the main monetary concern discussed between the worker and the potential employer when

Raise the Minimum Wage

811 words - 3 pages wage has not kept up with the current cost of living, and that it is falling behind. A minimum wage increase would help to stimulate the economy, and stop the diversification of the rich and the poor. “Labor conditions detrimental to the maintenance of the minimum standard of living necessary for health, efficiency and general well-being of workers” (Sklar 14). 2. Dorn, James A., and David Cooper. "Should

Comparing Adam Smith and Karl Marx

562 words - 2 pages Comparing Adam Smith and Karl Marx Smith and Marx agree upon the importance of capitalism as unleashing productive powers. Capitalism is born out of the division of labour... that is, it is made possible by dividing jobs up into simple tasks as a way of increasing efficiency. By increasing efficiency, then everyone can produce more than they personally need. The extra produced can go towards the accumulation of capital, (machines, more land

Similar Essays

Implementation Of Minimum Wages Policies In Malysia

1531 words - 6 pages – different from competitive models where firms are always assumed to be operating at peak efficiency – firms generally have some scope for increasing output, albeit usually at a cost of greater managerial effort. Efficiency Wage. A higher minimum wage may also motivate workers to work harder, independently of any actions by employers to increase productivity. According to "efficiency wage" theory, wages above the competitive-market rate may

Immediate Analysis

1117 words - 5 pages trace reasons for withdrawals and measures should be employed to bring them back on-board. However, if that is not forthcoming, new and relevant partners should be sought out and made to buy-into the idea. This is to ensure the smooth-running of the program. Financial Statement/Projections 3 years out According to Orton, Menkens & Santos (2009), this segment of the financial plan involves a demonstration of the efficiency of the plan, as well

We Should Abolish The Minimum Wage

852 words - 4 pages increased to keep pace. Anytime employers give businesses more flexibility, they will increase efficiency and lower prices. According to a March study by the Center for Economic and Policy Research “the minimum wage should have reached $21.72 an hour in 2012 if it kept up with increases in worker productivity”. For example, gasoline would affected because most labor associated with oil and gas production is already paid well above minimum wages. If

The Minimum Wage Should Be Increased

1038 words - 4 pages . Policies increasing the compensation of low-wage workers improve workers' efforts and reduce turnover. Economists explain this connection with efficiency wage theory. The theory implies that higher wages motivate workers to work harder and increase their incomes to enable them to eat well and become healthier. Increasing the minimum wage thus will increase productivity and demand for labor. A recent study by Andreas Georgiadis (2008) supported this