Fall Semester 2001

Professor Hendricks

LIR 445

1st Half Exam

                Please provide the following at the top of your exam booklet:  your name, your social security number and your group. Please label all parts of the questions. All questions will count equally in your total grade. You can complete all five questions or you can complete four of the five questions. If you complete four questions, your grade on the other question will be the same as the grade given to your group for the question that you turned in on Monday. If you complete five questions, your grade will be based on these five questions.  Each question is worth 30 points.  You should put the number of the questions that you have completed in the upper right of your exam.  The numbers should be vertical so that I can place the number of points next to each.  They do not need to be in order.

 

1.                    It is possible to exactly duplicate the profits that a company would achieve with a piece rate by paying hourly wages.

    1. In addition to paying hourly wages, you would also need to do something else.  What is it? (5 points)
    2. The alternative of paying hourly wages requires you to know some important information about the workers.  What is this information, and what do you additionally need if you are going to provide the same compensation to everyone? (10 points)
    3. Why would economists favor a piece rate over this system? (10 points)
    4. How does this question relate to MBO systems? (5 points)

2.                    You have decided to move your entire accounting function inside the firm when you have previously contracted with a public accounting firm to provide many of these services.  While your staff is quite competent, they need more help to complete all the necessary work.  You first must decide whether to hire accountants directly out of U of I or to hire them from competitors or from accounting firms

    1. Is there a reason why you might decide to hire the young, inexperienced workers over those workers with more experience even if you offered comparable wages? (8 points)
    2. How would the decision in (a) be influenced by the specificity of the on-the-job training that the accountants get(8 points)?
    3. If you must pay higher wages for experienced accountants from public accounting firms, how would you decide whether or not they will be worth this higher pay? (8 points)
    4. What qualities of your internal accounting staff must be considered in making this decision? (6 points)

3.                    Screening new workers is an expensive process. It is not unusual for costs involved in hiring a professional to reach as much as 50% of her annual salary. By increasing the time and resources involved into interviewing a prospective candidate a firm can get a more accurate signal regarding her ability. Explain your answer to each of the questions below.

    1. Will screening be as important when piece rates are paid as when hourly rates are paid? (8 points)
    2. Will screening be as important when workers work with expensive machines as compared to when they work by themselves? (8 points)
    3. Will screening be as important in just-in-time manufacturing as compared to manufacturing where large inventories of product are routinely kept? (8 points)
    4. When is it more likely that firms must invest in screening as opposed to workers making their own investments in their credentials? (6 points)

4.        There is a slight trend in the private sector to bring back testing as a method of choosing workers from a pool of candidates.  This is partly based on research that shows that personal interviews are poor predictors of worker quality.

a.        Under what conditions might a group of potential employees challenge the use of the test? (6 points)

b.       How could the employer show that the test was a necessary business practice? (6 points)

c.        How could the potential employees still challenge the test if the employers are able to meet their burden of proof in (b)? (6 points)

d.       If the employees are successful in the their challenge in ( c ), what would you expect to observe among groups of employees at the firm? (6 points)

e.        Why might the results in ( c ) support the use of different cutoffs for offers to different groups? (6 points)

5.         

a.        Explain the generic use of the term “swimming up stream” when referring to minority groups? (6 points)

b.       What is the key reason why this term has been applied to women? Name three changes in our economy would suggest that women are “swimming down stream” (8 points)

c.        Name 4 areas where black males are “swimming up stream” since the 1970’s. (8 points)

d.       Why are some people unwilling to accept statistics about the closing of the wage gap as a measure of the improvements in the economics status of minority groups? (8 points)