Question

1. Queen City Treating is a metal treating company that hardens prefabricated metal products for automobile accessories, including seat belt buckles, wheel rims, radiator caps, and other items. The company is experiencing some serious cost problems. Foreign competition, which uses better technology and has different cost structures, is taking away some of Queen City’s customers by offering lower prices. As a result, Queen City is scrutinizing all of its costs. The CFO has concluded that one area that needs revamping is the high labor cost of the senior workers. The company is considering a voluntary buyout of these workers, in which they would be offered a financial incentive to leave the company before their normal retirement age. Company statistics indicate that 30 percent of the workforce has over 25 years of service and is earning the top rate of pay. The total wage difference among the highest and lowest paid production workers is about $8 per hour, and the company utilizes about two million labor production hours per year. Management believes that replacing these more senior and higher paid workers with persons at lower rates of pay would significantly improve the costs and productivity of the business.

a. From a labor economics standpoint, are older workers more expensive? What factors would you use to assess this issue?

Answer 1

Answer a

Yes from economic stanpoint , the oler workerare more expensive because of thier working experience and skills .The old worker are capable of providing efficient training to new worker in the company an they can make the productivity to increase.The decision made by the management of the company solely staisfies the need of the company .Replacing the old worker with new one with lower pay rate will help in revamping the high labor cost to senior workers . I would consider the technological aspect toa access this issue .The replacement of old worker with new will provide the saving to invest in the making comaprative advantage to the rival companies . I would also consider the cost cutting factor to improve the sales of the company .

hAVE A GOOD DAY !