Why do firms alter labour hours just before employment?
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management
case study
published 09/05/2008
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SummaryThe model of labour demand in terms of hours worked by employees assumes that firms instantly adjust their employment when the economic environment or business cycle changes. A firm looking to change the size of its work force will always find that it is costly to make spontaneous changes to its labour force. A firm firing a large proportion of its workers, for example, will in most cases suffer some costs when the experience and knowledge of these workers disappear from the work environment. Differently, a firm wishing to expand employment or increase hourly working hours (this maybe due to a rise in output price) will find that hiring additional workers might be equally costly: the firm will have to process the job applicants through the personnel office and train new workers.
Table of Contents
- The effect of adjustment cost on labour demand.
- In choosing the amount of labour services, a company can alter the dimensions of labour input.
- The asymmetry between hiring and firing expenses will ultimately give rise to lower levels of employment in each coming cycle.
- The most common instance of changing the hours worked by employees is the increasing or decreasing availability of overtime.
- When hours worked reach ha at time t3 then the firm begins to take on new workers – as argued by Lindsay.
- A point that has not been treated so far is the fact of monopsonistic forces within the labour market.
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