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Designing an Anti-Shirking Policy
A manufacturing company is concerned about low productivity, believing that some employees are not exerting full effort. The management team is evaluating two policies to discourage this behavior.
- Policy 1: Invest in an advanced employee monitoring system. This system won't change wages but is expected to halve the average time it takes to identify and dismiss an unproductive worker.
- Policy 2: Implement a significant wage increase for all production line workers, making the job much more lucrative than other available opportunities.
Critique both policies. Which policy is more fundamentally designed to alter an employee's calculation of the monetary benefit from shirking, and why? Your answer should explain how each policy influences the components of that calculation.
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Introduction to Microeconomics Course
The Economy 2.0 Microeconomics @ CORE Econ
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Employee's Total Payoff from Shirking
An employee earns a weekly wage of $800. If this employee decides not to exert effort, they estimate they can avoid detection for 5 weeks before being dismissed. After dismissal, their weekly income from alternative sources would be $200. Assuming a total time horizon of 12 weeks from the moment the employee starts shirking, what is the employee's total expected monetary payoff over this 12-week period?
Comparative Analysis of Shirking Payoffs
Deconstructing the Payoff from Shirking
An employee earns a weekly wage and is considering not exerting effort. They estimate they will remain undetected for a certain number of weeks (s) before being dismissed, after which they will receive a lower weekly income for the remainder of a total time horizon (h). According to the standard model for this situation, an increase in the weekly income received after dismissal would decrease the employee's total expected monetary payoff from choosing not to exert effort.
Evaluating the Impact of Unemployment Benefits on Work Incentives
An employee earns a set weekly wage and has an alternative weekly income they could earn if they were to lose their current job. The employee is considering not exerting effort and estimates they can go undetected for a certain number of weeks before being dismissed. The employee's total expected monetary benefit from this course of action is calculated over a fixed total time horizon. If the employer improves its employee supervision methods, making it easier to detect a lack of effort, which component of the employee's total expected benefit calculation is most directly affected?
Calculating the Expected Undetected Period
An employee earns a weekly wage of $1,000. They believe they can avoid exerting effort for 4 weeks before being dismissed. Over a total time horizon of 15 weeks, their total expected monetary benefit from this strategy is calculated to be $5,100. For the 11 weeks after dismissal, their weekly income from other sources must be $____.
An employee is calculating their total potential monetary benefit from not exerting full effort over a specific time horizon. This calculation considers their current wage, the expected duration before this behavior is detected, and the income they would receive after dismissal for the remainder of the time horizon. Match each change in circumstance to its most likely direct effect on this calculated benefit.
Designing an Anti-Shirking Policy