Homework Question on Wages and Labor Markets Conditions
- Chief Executive Officer (CEO) Pay: There are several possible methods for determining the pay of CEOs in large corporations.
- Using the three methods listed below; list the advantages and disadvantages of each method. Then choose one method as the best and explain why it is the preferred method:
- Market determination of pay through supply and demand
- Maximum cap on CEO pay set by national legislation and
- Pay set by board of directors based on survey of comparable corporations.
- Your response must be at least three paragraphs in length and with no less than 200 words. (This assignment deals with wages and labor market conditions along with supply and demand.) P.S.
- This critical thinking assignment is an application of knowledge gained (fundamental economic concepts and terms and how they are used by individuals, business and governments) to date as covered in chapters 1 through 7 in your textbook.
- This assignment challenges each student to logically (using the critical thinking…forming your own opinions and what you have learned to date in this course) address the pros and cons (based upon the student’s understanding) of the three options presented.
Homework Answer on Wages and Labor Markets Conditions
Determining CEOs’ pay is a very important factor in a business organization. Therefore, applying the most suitable method for their pay is a major decision for the company’s level of success. The advantage of considering a CEO’s pay according to the method of market determination is that, the procedure has motivated since increasing a high level of productivity, would be able to get higher outputs and therefore the level of natural unemployment will be lower.
The disadvantage of applying this method on the other hand is that the procedure creates a large inequality since for those who have full time jobs will be able to earn more than the part timers. However, this increases the level of job insecurity since man organization management would be focusing on extra labor services from their staffs and if not satisfying, they could lose their jobs.
In applying the set cap rules set by the legislation to pay a CEO, has an advantage where, through maximization of wages, the level of currency devaluation would decrease since it limits the level of which one can earn and therefore limiting the availability of the currency. However, the application of this procedure has the disadvantages of organizations losing skilled labor since no one will be willing to work for lower wages. Therefore, such citizen will tend to outsource their skills elsewhere where they earn better.