Figure 17-5
Figure 17-5 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced.
-Refer to Figure 17-5.Which of the following statements about Scheme II is false?

Question

Figure 17-5  
Figure 17-5 shows two different compensation schemes for the Safelite Glass Corporation, an installer of auto glass windshields. Under Scheme I, the firm pays a consistent wage of $80 per day based on an 8-hour workday. Qmin represents the cut-off point under the hourly-wage system: if a worker installed fewer than Qmin windshields, the worker got fired. Scheme II represents a piece-rate scheme with an earnings floor: no worker would get less than $80 per day (for an 8-hour workday) and would have to produce at least Qmin. For any output level beyond Q* the worker earned an additional $20 for each unit produced.
-Refer to Figure 17-5.Which of the following statements about Scheme II is false?

Quizplus · Accepted Answer

Scheme II is more risky for new or less experienced employees because they may not be able to consistently produce beyond Qmin in order to earn the earnings floor of $80 per day. Senior employees, however, may have more experience and skill, making it easier for them to consistently produce beyond Qmin and earn additional wages. Therefore, statement D is false.