The owners of Market Analysts, a business and economics consulting firm, are big believers in paying benchmark competitive wages. They pay all (non-legally specified) compensation in wages. If the employee wants a benefit, the company has an insurance program but it comes out of the paycheck. Market Analysts tends to hire very young workers just out of college. They are energetic and work hard, but after two years they tend to leave for other firms, taking valuable training lessons with them. If Market Analysts want to keep its employees, what changes should it make to the terms of employment offered to new employees?

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The Answer is The problem is that the overall level of compensation (salary and fringe benefits) is high enough to attract recent college graduates, but the compensation package is not great enough in order to retain more experienced workers. This firm has to offer a more competitive package of monetary compensation and fringe benefits in order to keep their employees. Young college graduates may have different preferences for fringe benefits than slight more experienced employees who are starting families. This firm's human resources compensation packages are quite competitive for entry level workers, but do not provide more experienced enough fringe benefits in order to keep them around. This firm should discover what benefits employees want in order to remain on the job. On the graph below, any compensation offer of salary-only on the vertical axis is not meeting the displayed reservation level of utility for the experienced worker. An offer of (F*,S*) would be the cost-minimizing way to keep these valuable employees. <img src="https://d2lvgg3v3hfg70.cloudfront.net/TB1778/11ea6db8_cd68_d113_9c10_037c9b3973b5_TB1778_00.jpg" alt="The problem is that the overall level of compensation (salary and fringe benefits) is high enough to attract recent college graduates, but the compensation package is not great enough in order to retain more experienced workers. This firm has to offer a more competitive package of monetary compensation and fringe benefits in order to keep their employees. Young college graduates may have different preferences for fringe benefits than slight more experienced employees who are starting families. This firm's human resources compensation packages are quite competitive for entry level workers, but do not provide more experienced enough fringe benefits in order to keep them around. This firm should discover what benefits employees want in order to remain on the job. On the graph below, any compensation offer of salary-only on the vertical axis is not meeting the displayed reservation level of utility for the experienced worker. An offer of (F*,S*) would be the cost-minimizing way to keep these valuable employees.  " class="answers-bank-image d-block" rel="preload" >

The Owners of Market Analysts, a Business and Economics Consulting