Congratulations! You have just been hired as the director of human resources for the Hiram N. Firem corporation. Until now, this firm has typically hired labour in an unfettered, ultra-competitive labour market. It has always paid competitive wages, but has always laid off workers at the first sign of a downturn in product demand and hired them at the first sign of an upturn. Some might call this the disposable labour model, but in technical jargon, it is called a spot market. Now the management is considering modifying its compensation and lay-off practices.
• The first question that you must address is how the executives should be paid. Until now, they have received stratospheric compensation compared to the rank-and-file workers. Explain this phenomenon by appealing to the salary-as-a-tournament-prize approach of the economists Lazear an Rosen.
• In establishing the pay structure within an organization, trade-offs are involved in determining th optimal degree of inequality of pay. Explain the nature of this trade-off: what factors push toward salary compression, and what factors push toward greater dispersion?
• Now it is time to time to develop a wage/seniority policy for the rank-and-file workers. You are t analyze a deferred compensation system. Give a graph and a brief economic explanation of the wage productivity, and seniority profile. Explain the rationales for deferred compensation.
• Finally, explain the link between a deferred compensation mechanism and the policy of mandator retirement.

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The Answer of Congratulations! You have just been hired as the director of human resources for the Hiram N. Firem corporation. Until now, this firm has typically hired labour in an unfettered, ultra-competitive labour market. It has always paid competitive wages, but has always laid off workers at the first sign of a downturn in product demand and hired them at the first sign of an upturn. Some might call this the disposable labour model, but in technical jargon, it is called a spot market. Now the management is considering modifying its compensation and lay-off practices.
• The first question that you must address is how the executives should be paid. Until now, they have received stratospheric compensation compared to the rank-and-file workers. Explain this phenomenon by appealing to the salary-as-a-tournament-prize approach of the economists Lazear an Rosen.
• In establishing the pay structure within an organization, trade-offs are involved in determining th optimal degree of inequality of pay. Explain the nature of this trade-off: what factors push toward salary compression, and what factors push toward greater dispersion?
• Now it is time to time to develop a wage/seniority policy for the rank-and-file workers. You are t analyze a deferred compensation system. Give a graph and a brief economic explanation of the wage productivity, and seniority profile. Explain the rationales for deferred compensation.
• Finally, explain the link between a deferred compensation mechanism and the policy of mandator retirement.

Congratulations! You Have Just Been Hired as the Director of Human