ECON 3400 Chapter Notes - Chapter 11: Asteroid Family, Human Capital, Hardcore Wrestling
23 Feb 2018
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Increase in earnings over their career through raises and promotions. To the extent that these are based on performance, they are a type of incentive scheme. Relatively tight bands of pay at lower levels, but the bands widen at higher levels: suggests that the hope of winning a promotion could be an important source of incentives for these managers. Sometimes a demotion actually comes with a raise. The firm eases out a poor performer, encouraging him or her to search for a new job can benefit both the employer and employee. The firm avoids firing costs and potential litigation, while the employee avoids the stigma of a demotion. Demotions can be rare because: the firms may be conservative about placing employees into important positions until their skills are proven, of accumulation of human capital. If workers improve skills over time, performance increases those with more skills move into higher positions.
