Question

Lamps plus manufactures lamps for residential homes. the president of the company, laura cole, is convinced that she must get concessions from workers if lamps plus is to compete effectively with increasing foreign competition. in particular, cole is displeased with the cost of employees benefits. she doesn’t mind conceding a competitive wage increase (maximum 3%), but she wants the total package to cost 3% less. the current cost are as follows. you also have data from a consulting firm that indicate employee preferences for different forms of benefits (9.10) based on all this information, you have two possible concession packages that you propose, labelled option 1

Answer 1

In an effort to reduce costs, Lamps Plus is considering tying employee wage increases to the cost of living while simultaneously reducing the overall cost of employee benefits. Historical labor union negotiations, such as those with COLAs, protect wages from inflation but may lead companies to invest more in physical capital than labor. This reduces the number of workers needed as machinery becomes more prevalent in production.

Step-by-step explanation:

The scenario of Laura Cole and Lamps Plus represents a common challenge in labor relations where a company seeks to manage costs while remaining competitive, particularly against foreign competition. Cost-of-living adjustments (COLAs) are a historical example of how labor unions have sought to protect employee wages against inflation.

These types of negotiated adjustments ensure that wages automatically rise to match increases in the cost of living. However, they may lead firms to prefer investing in physical capital (like machinery) over labor if such investments lead to higher productivity. This can result in reduced labor requirements as the machinery can take over tasks previously done by workers, making some jobs obsolete and potentially reducing the number of employees.

In the example of Lamps Plus, Laura Cole is looking to balance a modest wage increase with a reduction in the total package cost for benefits. It illustrates the trade-offs that companies must consider: providing a fair wage to workers while managing total benefit costs to remain competitive. It also highlights the firm's strategic options in response to increased labor costs such as adopting more capital-intensive production methods.