Large companies across the country have moved toward two-tiered wage structures
ID: 1130868 • Letter: L
Question
Large companies across the country have moved toward two-tiered wage structures for their union employees. The following website documents what has happened with a prominent company in Wisconsin since they have moved to the structure: http://www.jsonline.com/business/kohler-says-elimination-of-two-tier-wage-system-also-would-result-in-elimination-of-jobs-b99623301z1-353834981.html Answer the following questions related to the two-tiered concept:
a. What does the company argue would likely happen to jobs in the location if indeed the two-tiered structure were eliminated?
b. What is the company’s rationale for their position in (a)”
c. What would likely happen to the overall demand for labor in the area if the two-tiered structure were eliminated? Explain your rationale for your answer.
Explanation / Answer
a. The company dignitaries are arguing that if two - tiered structure is eliminated then it will lead to job cuts by the company.
b. This is because it will lead to elimination of local manufacturing jobs by the company as elimination of two tiered wage structure will lead to increase in the cost of the firm due to Tier A wage level. This will reduce the competitiveness of the firm and in future reduce the profit level of the firms.
c. The overall demand for labor will decrease in the area in case of elimination of two tiered wage structure in the economy as increase in the wage rate will increase cost of production and thus firms will hire few laborers.
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