3 ms·
This is the crux of the issue. Let's take a staff of 100, at salary level 100. Total wage cost is 10000. The owner wants a 10% increase in labour. How much wil
by graeme 8y ago
This is the crux of the issue. Let's take a staff of 100, at salary level 100. Total wage cost is 10000.
The owner wants a 10% increase in labour. How much will it cost? Let's assume they can only find new labour at 110, but if they pay this they must pay existing labour 110 as well.
110 * 110 = 12100. A 21% salary increase for a 10% labour increase.
Also it probably won't be a straight 10% labour increase, as some % will have to go to admin and the organizational costs associated with size.
So, that's why. It's also potentially zero sum, as if one employer raises wages, then others will follow, and there may not be a 10% gain in employees. Just increased costs all around. (There will be some gain in employees of course, as workers are pulled in from less efficient sectors)
- choicenotchance 8y agoYou probably meant 101x110 =11,110
- pdimitar 8y agoThere are people who would work for the companies but not at their current wage levels. Increase the pay and the pool increases as well.
- graeme 8y agoThat was explicit in my post. You increase the labour pool by increasing wages. But when supply is constrained, you get a less than linear increase in output per unit of wage increase.