Asked by Danielle Herrera on Jun 10, 2024
Verified
In the labor market, contracts are often designed to include a variable salary component that is tied to some measure of performance. Why?
A) Such contracts provide workers with the incentive to work hard.
B) Most people are risk-loving and thus variability in their compensation leads to higher total utility.
C) Labor unions demand a variable salary component.
D) The variable component reduces wages paid by firms.
Variable Salary
A compensation structure where an employee's earnings can vary based on performance, sales, or other predetermined criteria.
Labor Unions
Organizations that represent the collective interests of workers to improve wages, working conditions, and benefits.
- Examine the effects of monetary incentives and performance compensation on the actions of employees in the labor marketplace.
- Assess the impact of different pay structures within labor markets on their ability to attract and encourage workers effectively.
Verified Answer
MB
Mikey BarileJun 16, 2024
Final Answer :
A
Explanation :
Variable salary components tied to performance provide incentives for workers to increase their effort and productivity, aligning their interests with those of the firm. This can lead to improved outcomes for both parties.
Learning Objectives
- Examine the effects of monetary incentives and performance compensation on the actions of employees in the labor marketplace.
- Assess the impact of different pay structures within labor markets on their ability to attract and encourage workers effectively.