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The Bureau of Labor Statistics showed an astonishing 5 percent gain in productivity in 2001’s fourth quarter. Some argued that technology had again made the economy more productive than ever before....

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The Bureau of Labor Statistics showed an astonishing 5 percent gain in productivity in 2001’s fourth quarter. Some argued that technology had again made the economy more productive than ever before. White-collar workers are more likely to argue that the gains have been made on their backs. The recession’s layoff survivors bitterly point to the various schemes management has employed to get them to work harder for less money.

· Longer hours. It is estimated that 20 percent of the workforce spends more than 49 hours a week on the job – mostly professional and white-collar workers.

· Reclassifying workers as managerial. Class action suits charging that firms are misclassifying jobs to skirt overtime pay are on the rise.

· Loading up on temporary workers. The ranks of temps grew 56 percent during the boom years – a just-in-time workforce that receives no severance pay and no benefits. The temps have been the fastest growing segment of employment in 2002.

· Making less do more. Firms are shrinking the workforce without reducing workloads. They are also forcing employees to work harder to increase sales.

· Shifting risk. Pay is increasingly tied to company performance. That saves money when profits disappear while spurring harder work.

This is all well and good for the present but what happens when the economy rebounds? The spectre of tight labor markets in the future coupled with the feeling of exploited workers with long memories, does not auger well for those firms who are seeking enhanced profits right now.

Source: Michelle Conlin, “The Big Squeeze on Workers,” Business Week, May 30, 2002, p. 96.

Questions:

1. Does this case illustrate the law of diminishing marginal productivity?

2. In this case, less and less of a single factor, labor, is being used. Does this have anything to do with the law of diminishing marginal utility?

3. Does the case distinguish between long-run and short-run profits?

4. Does the case distinguish between long-run and short-run production costs?

5. If you were an employee of one of these companies, what would your behavior be when the economy turned for the better?

Write your answers in a paper of no fewer than 500 words.

Answered Same DayDec 31, 2021

Solution

Robert answered on Dec 31 2021
48 Votes
Big Squeeze
Yes. This case refers to a short run production function. In the short run at least one factor of
production is fixed (capital) and output can be varied by changing the variable factor labour.
When more and more variable factors are added with fixed factor marginal productivity of
the variable factor will decline gradually. When the economy slowly moves out of the
ecession firms have to increase the output to earn profit. It is not possible for them to alter
the fixed factor in the short run. Firms achieved growth in productivity through adopting
some anti labour policies.
This has nothing to do with diminishing marginal utility. This is related with diminishing
marginal return. This is a feature of short run production function. Here firms are using more
of a variable factor by increasing the working hours or adding temporary workers to increase
the...
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