Dr. Caspian O'Crunch: The Number Case, Page 97 Strategic Com
For Drcaspianocrunch The Number Case Page 97 Strategic Compensation
For Dr.Caspiano Crunch the number case page 97 (Strategic compensation book) Table 4-3 illustrates the calculation of a piecework award for a garment worker who has completed two hours of service. Over the course of a six-hour shift, his productivity varies: First hour: 10 garments above the hourly standard Second hour: no garments above the hourly standard Third hour: 15 garments above the hourly standard Fourth hour: 13 garments above the hourly standard Fifth hour: 9 garments above the hourly standard Sixth hour: 3 garments above the hourly standard Questions: 4-9. Calculate the worker’s total earnings for his shift. 4-10. How many dollars did the garment worker earn in incentive payments? 4-11. On the following day, the garment worker completed a six-hour shift, but did not exceed the standard at any time during this shift. How much did he earn for the day? Explain the calculation
Paper For Above instruction
The scenario presented involves calculating a garment worker's total earnings based on their productivity over a six-hour shift, as outlined in Table 4-3 of the strategic compensation text. The calculations of incentive payments in piecework systems depend on the number of garments produced above the standard within each hour. This analysis will determine the total earnings for the shift, the incentive payments earned, and the earnings on a subsequent day with no excess productivity.
Understanding Piecework Compensation
Piecework compensation is a form of wage payment where workers are paid a set rate for each unit of production. In the context of garment manufacturing, incentive pay is often based on the number of garments produced above a predetermined standard per hour. The goal is to motivate workers to increase productivity, aligning their earnings with their output. Typically, incentive structures involve a standard rate per garment, with additional pay for garments produced beyond the standard (Milgrom & Roberts, 1992).
Calculating Total Earnings for the Specific Shift
Table 4-3 indicates the number of garments produced above standard per hour for six hours: 10, 0, 15, 13, 9, and 3 garments, respectively. To determine total earnings, we first need to establish the standard rate per garment and the incentive rate, which are usually provided in the company's compensation plan. For the sake of this calculation, assume the standard rate per garment is $1, and the incentive rate doubles this, meaning each garment above standard earns an additional $1, making a total incentive of $2 per garment.
Step-by-Step Calculation
1. Calculate the incentive earnings per hour:
- Hour 1: 10 garments × $2 = $20
- Hour 2: 0 garments × $2 = $0
- Hour 3: 15 garments × $2 = $30
- Hour 4: 13 garments × $2 = $26
- Hour 5: 9 garments × $2 = $18
- Hour 6: 3 garments × $2 = $6
2. Sum the incentive earnings:
$20 + $0 + $30 + $26 + $18 + $6 = $100
3. Calculate base wages: Assuming the worker earns a base salary or hourly wage for the 6 hours (e.g., $12/hour), the base pay equals:
6 hours × $12 = $72
4. Total earnings: Sum of base pay and incentive earnings:
$72 + $100 = $172
This total includes both standard wages and incentive payments, reflecting the worker's complete earnings for the shift.
Incentive Payments Explanation
The incentive payments of $100 are derived solely from garments produced above the standard. As the incentive rate doubles the basic rate per garment, the worker benefits notably from exceeding the standard output. The incentive system rewards productivity, motivating workers to produce more garments, which aligns with the principles of efficiency wage theory (Shapiro & Stiglitz, 1984).
Earnings for a Day with No Excess Productivity
In the second scenario, the worker completes a six-hour shift without exceeding the standard at any point, meaning all garments produced are at or below the standard output. Therefore, no incentive payments are earned. The total earnings in this case depend solely on the base wages. Assuming the same hourly rate of $12, the total earnings would be:
6 hours × $12 = $72
This reflects only the guaranteed wage without additional compensation for exceeding productivity standards.
Implications of Incentive Systems
The analysis demonstrates that incentive payments significantly influence the total earnings of garment workers. Such systems can effectively motivate higher productivity, but they also risk promoting quantity over quality if not carefully monitored (Lazear & Rosen, 1981). Additionally, workers with fluctuating productivity levels benefit from incentive schemes that reward above-standard output, providing financial motivation during productive periods. Conversely, days of no excess output result in earning only base wages, which maintains fairness and stability in workers' compensation.
Conclusion
In summary, calculating a garment worker's total earnings in a piecework incentive system involves accounting for both base wages and incentive payments derived from above-standard output. The detailed calculations demonstrate how productivity variations impact total earnings. Effective incentive schemes balance motivating increased output while ensuring fair compensation, which is fundamental for maintaining worker satisfaction and productivity in manufacturing environments.
References
- Milgrom, P., & Roberts, J. (1992). Economics, Organization and Management. Prentice Hall.
- Shapiro, C., & Stiglitz, J. E. (1984). Equilibrium Unemployment as a Worker Discipline Device. The American Economic Review, 74(3), 433-444.
- Lazear, E. P., & Rosen, S. (1981). Rank-order tournaments as optimal labor contracts. Journal of Political Economy, 89(5), 841-864.
- Milgrom, P., & Roberts, J. (1992). Economics, Organization, and Management. Prentice Hall.
- Naylor, J. C., & Pritchard, R. D. (1965). A study of incentive systems in five plants. Harvard Business School.
- Prendergast, C. (1999). The Provision of Incentives in Firms. Journal of Economic Literature, 37(1), 7-63.
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