Deck 6: Labour Demand, Non-Wage Benefits, and Quasi-Fixed Costs

Question 1

If quasi-fixed labour costs are very high, employers may try to meet their labour demand needs by:

A) Increasing the intensity of work effort
B) hiring more workers.
C) making their existing workers work overtime
D) starting a work-sharing program
E) hiring less workers

Answer 1

C

Question 2

Why did the unemployment rate decline during the recession of 2008-09 in Germany?

A) Because out of the 19 OECD countries, all but Germany had low unemployment rate prior to the recession.
B) Because the unemployment rate of all OECD countries had declined during this period.
C) Because out of the 19 OECD countries, only Germany had short-time work schedule programs.
D) Because of the presence of large and effective short-time work schedule programs in Germany.
E) None of choices are correct.

Answer 2

D

Question 3

Economists have made several recommendations to reduce barriers to employment sharing programs. Which of the following is an example of such a recommendation?

A) banning the scheduling of overtime hours
B) reducing quasi-fixed labour costs
C) raising quasi-fixed labour costs
D) hiring more employees in order to reduce the need for overtime hours
E) prorating employer contributions to medical, dental, and life insurance plans according to the number of hours worked

Answer 3

E

Question 4

Suppose a government seeks to reduce the extent to which firms have their workers put in overtime hours. Which of the following would be ineffective?

A) Reducing the absolute maximum number of hours that any worker can work
B) Granting workers the right to refuse overtime
C) Decreasing the overtime wage premium
D) Reducing the length of the standard work week beyond which an overtime premium must be paid
E) All the choices would have the desired effect

Question 5

In which countries have short-time compensation programs been developed the most?

A) Japan
B) Australia
C) Continental Europe
D) The United Kingdom
E) North American countries

Question 6

When labour costs are quasi-fixed, then which of the following statements are true?

A) They are fixed in the short run but variable in the long run.
B) They are fixed in the long run but variable in the short run.
C) The employer has committed to them in a contract.
D) They are independent of the number of hours worked by a firm's workforce.
E) They are dependent on the number of hours worked by a firm's workforce.

Question 7

According to the "lump-of-labour fallacy," _.

A) Many workers have more than one job.
B) There is always a situation of high unemployment.
C) Unemployed workers always exist.
D) There is a fixed number of jobs in the economy regardless of wages.
E) There are always extra jobs available in the economy.

Question 8

What is the impact of an increase in the magnitude of quasi-fixed labour costs on the demand curve for labour?

A) The demand curve shifts downwards and to the left.
B) The demand curve becomes less elastic.
C) There is no change to the demand curve.
D) The demand curve becomes more elastic.
E) The demand curve shifts upwards and to the right.

Question 9

The benefits of using deferred compensation include all of the following, except that:

A) It serves as a screening device for hiring new workers.
B) It drives a wedge between the marginal revenue product and the wage.
C) It raises the cost to the employee of being fired for poor work, absenteeism and other work-ethnic related issues.
D) It fosters employee loyalty and reduces unwanted turnover.
E) It strengthens work incentives.

Question 10

Deferred compensation refers to:

A) benefits that the worker receives only after his/her performance has been evaluated
B) benefits that the worker receives after retirement
C) benefits that the worker receives at a later stage in his/her career
D) benefits that the worker receives after filling out the proper paperwork
E) None of choices are correct.

Question 11

Which of the following statements regarding the presence of non-wage benefits is false?

A) Major components are pension and welfare plans
B) Pay for time not worked is the fastest growing component of the non-wage benefit since 1960s.
C) As a percentage of the payroll among large firms, they comprised about 37% in the late 1990s.
D) As a percentage of the payroll among large firms, there has been a downward trend in the presence of non-wage benefits over the past 60 years or so.
E) A major component is pay for hours that are not worked.

Question 12

The practice of worksharing refers to:

A) sharing the scarce number of jobs that are available by reducing the length of the standard work week.
B) sharing the scarce number of jobs that are available by banning overtime.
C) sharing the scarce number of work hours and jobs that are available by reducing the number of jobs.
D) sharing the scarce number of jobs that are available by hiring new workers.
E) sharing the scarce number of employees that are available.

Question 13

All of the following are factors contributing to the rise in the proportion of the labour force hired by temporary-help agencies, except that:

A) Employers need to replace a permanent employee who is temporarily absent.
B) Employers seek to develop stable, loyal, and productive labour forces.
C) Employers can avoid hoarding excess labour.
D) Employers require the services of an employee for only a short period.
E) Employers seek to reduce quasi-fixed labour costs.

Question 14

Which of the following is not a category in pay for time not worked?

A) unemployment insurance
B) pensions
C) welfare
D) overtime pay
E) workers' compensation

Question 15

Which of the following statements regarding wage costs is true?

A) They area deferred compensation.
B) They are a fixed labour cost.
C) They are a quasi-fixed labour cost.
D) They are a variable labour cost.
E) They are a one-time labour cost.

Question 16

In the context of quasi-fixed labour costs, the "buffer" refers to a gap between the value of the marginal revenue product of a worker and his/her wage. Which of the following statements is false?

A) It is consistent with labour hoarding behaviour on the part of firms.
B) When labour demand rises, employment might not rise by as much.
C) When labour demand falls, employment might not fall by as much.
D) The buffer is created by the presence of quasi-fixed labour costs.
E) None of choices are correct.

Question 17

Which of the following statements regarding the practice of labour hoarding is false?

A) It is most likely to occur with high-skilled workers.
B) It is most likely to occur in situations where quasi-fixed labour costs are high.
C) There is not a lot of empirical evidence that firms adopt this practice.
D) It is most likely to occur when most labour costs are variable.
E) It is most likely to occur with low skilled workers.

Question 18

In the late 1990s, some observers wanted to alter the composition of labour input somewhat such that more jobs are created and those with jobs work fewer hours. What type of policy measure might promote that goal?

A) Lowering the ceiling of wages and salaries to which social contributions apply
B) Wage cuts across the board
C) Increasing the fringe benefits that are available to workers with jobs
D) Increasing the overtime premium
E) None of the choices are correct.

Question 19

Why do employers have an interest in paying their workers some of their compensation in the form of non-wage benefits?

A) Because they serve to reduce unwanted turnover and provide certain work incentives.
B) Because the government pays part of the compensation package.
C) Because they can reduce unwanted turnovers and certain work incentives.
D) Because they reduce the costs of the compensation package that the employers pay.
E) Because they increase certain work incentives and unwanted turnovers.

Question 20

Layoff rates are much higher among low-skilled workers compared to high-skilled workers because:

A) The quasi-fixed labour costs of low-skilled workers are lower.
B) High-skilled workers have a smaller wedge or buffer between their marginal revenue product and their wage.
C) Low-skilled workers tend not to work as hard as high-skilled workers.
D) Hiring and training costs are significantly higher for high-skilled workers.
E) The quasi-fixed labour costs of low-skilled workers are higher.

Question 21

Congratulations! Based on your performance advising the prime minister on employment related issues in the past, your contract has been renewed. This time your task is to analyze the effect of quasi-fixed labour costs on the demand for labour. In the report that you prepare for him or her, you should cover the following points.
• Define quasi-fixed labour costs and give some concrete examples.
• Explain intuitively the impact of quasi-fixed labour costs on labour market behaviour. You need not give a graph, but give some mention of the discounted present value of the stream of wages and the stream of the values of marginal product is desirable.
• The prime minister is very concerned about high unemployment and would like for you to explain why overtime is prevalent when employers could be meeting their labour force needs by hiring unemployed workers. He is also concerned about the growing use of casual and part-time labour rather than full-time labour. Do you have any policy recommendations that speak to this issue?