Discuss how long will the employee want to work, Macroeconomics

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Discuss how long will the employee want to work

Assume a firm has designed its internal labor market structure in a way that rewards workers for tenure with increased earnings. The structure of wages is given by following formula w_t = 8000+350t, where w is annual earnings of worker and t is number of year's employee has been with the firm.

1. Suppose that employees are forced to retire after the 45 years and have an annual MRPL of $15,000. Would the existing earnings structure and length of work life be consistent with the firm's profit-maximizing behavior? Discuss What if the employees are forced to retire after 40 years?

2. Suppose that mandatory retirement is abolished. A worker's reservation wage is assumed to be w_r = 6000+360t. If the structure of wages has not changed, when will the firm want the worker to retire? Discuss how long will the employee want to work?

3. Discuss the firm responds to the situation in (2) by revising their payment scheme. The formula for the new scheme is w_t2 = 7800+320t. When will the firm want the worker to retire? Discuss how long will the employee want to work?

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Macroeconomics: Discuss how long will the employee want to work

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Macroeconomics: Discuss how long will the employee want to work

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Recent Questions Asked Macroeconomics

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Request for Solution File

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Macroeconomics: Discuss how long will the employee want to work

Reference No:- TGS0873140

Recent Questions Asked Macroeconomics

Q : Find out the mass ratio necessary to boost

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