ECON 4000 - Course Overview

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ECON 4000 (UGA)
The Economics of Human Resources (3 semester hours)

Web Course Format: ALISSA

This course can be taken
    -> as a web course
    -> as a print course

Lessons for this course can be submitted and/or be returned
    -> via U.S. mail
    -> via fax return from IDL

Begin the registration process for this course

Not open to students with credit in ECON 4600.

Prerequisite: ECON 2105 and ECON 2106.

The application of microeconomic principles to the study of the behavior of individuals and business firms in the labor market. The roles of private institutions and public policies in affecting worker compensation, employment, unemployment, and the distribution of labor-market earnings.

Requirements: Eleven lessons, two examinations.

Instructor: Robi Ragan, The University of Georgia.

Text: Lazear, Personnel Economics for Managers, John Wiley & Sons, 1998.

ECON 4000
The Economics of Human Resources

COURSE OVERVIEW

Introduction

This course, the Economics of Human Resources, is intended not only for economics majors but for students majoring in business and other areas as well. As preliminaries to this course you should have taken the principles classes of both microeconomics and macroeconomics. Therefore, I assume you are familiar, at least to some degree, with introductory economics. You may be wondering what more this course can add, especially if you are not majoring in economics.

Economics of Human Resources is a specialty of general economics that views people in their roles as producers (or workers). This is not an insignificant role, for people spend at least one-third of their time at jobs or in work relationships. It clearly is the case, then, that this dimension of an economy’s functioning is important. Matters such as who will be hired by a firm, who will be laid off, how to motivate workers to produce more, how to evaluate one’s work, etc., are critical elements fixing the level of satisfaction produced by an economy.

The textbook is an economic approach to personnel issues. Some readers may find it incongruous to link personnel, which seems to be more of a managerial topic, to economics, which focuses on technical and impersonal issues like the allocation of resources and seems to shy away from the more human factors that personnel analysts address. However, the past couple of decades of research prove that appearances are misleading. Economists have overcome their tendency to focus on more easily quantified variables, broadening the scope to ask questions that are of key interest to individuals who manage human resources.

To say that economics forms the basis of the analysis does not imply that human factors are ignored. Using economics as the framework simply implies that workers and firms take actions that are in their own best interests. And although we will be looking at personnel issues from an economic viewpoint, there are still issues of major significance to personnel practitioners that are not addressed in this book because simply, for now, economics has little or nothing to say on these issues.

Topics that we will be covering in this course (not necessarily in this order) and that are important in virtually any job are the following:

Recruitment and Hiring: How a firm decides on the type of workers to hire, how it decides how many workers to hire, decisions involving the skills it is looking for in its workers, how to attract the workers it needs and avoid adverse selection from those it does not want, etc. Turnover: How should a firm view turnover? When is it profit-increasing for workers to leave, and when is it detrimental to profits? Which workers should a firm strive most diligently to retain? To lay off? What kinds of compensation policies are most likely to lead to optimal turnover patterns?

Downsizing: Sometimes economic conditions make it necessary to lay workers off. How should this be done? Buyout schemes can be used to the advantage of both the firm and the workers. How are such buyouts to be constructed? When should a firm contract and when should it expand the size of its workforce and how can these decisions be made systematically?

Motivating Workers to High Levels of Productivity: A large section of this course is devoted to incentives. How can a firm directly and indirectly motivate its workers to be more efficient? There are many ways, but which ones are best?

Teams: When are teams important, and when can firms allow individuals to act on their own? What monetary and other incentives can be used to produce high levels of teamwork?

Benefits: One of the most important areas of personnel analysis involves benefits. Many firms do not recognize that there is a trade-off between benefits and wages. The ratio of benefits to wages can be selected in a way that best serves both the firm’s and the workers’ interests. How does a firm find the optimal ratio?

The foregoing simple descriptive listing indicates the range and complexity of problems that form the basis for this course. The subject of labor economics deals with the study of complex human relationships, which we will try to develop and understand using the tools of economic analysis.

Outside Readings

No specific outside work beyond the textbook-based written exercises, the midterm, and the final are required in this course. Even so, it is strongly urged that you supplement chapters with which you may be having extra difficulties with the respective chapters of the following books or articles from journals:

Setting Hiring Standards (chapter 2). Castagnera, James O. Employment Law Answer Book, 2nd edition, New York: Panel Publishers, 1993.

Hiring the Right People (chapter 3). Lazier, Edward P. "Salaries and Piece Rates," Journal of Business, 1986.

Variable Pay or Straight Pay (chapter 5). Kohn, Alfie. "Why Incentive Plans Cannot Work," Harvard Business Review, 1993.

The Theory of Human Capital (chapter 6). Oi, Walter. "Labor as a Quasi-fixed Factor," Journal of Political Economy, 1962.

Turnovers, Layoffs, and Buyouts (chapter 7). Castagnera, James O. Employment Law Answer Book (2nd ed.). New York: Panel Publishers, 1993.

Promotions as Motivators (chapter 9). Baker, George, Michael Gibbs, and Bengt Holmstrom. "Hierarchies and Compensation: A Case Study," European Economic Review, 1993.

Gibbs, Michael. "Incentive Compensation in a Corporate Hierarchy," Journal of Accounting and Economics, 1995.

Seniority-Based Incentive Schemes (chapter 11). Dore, Ronald. Flexible Rigidities: Industrial Policy and Structural Adjustment in the Japanese Economy, 1970-80. Stanford University Press, 1986.

Teams (chapter 12). Hackman, J. Richard, ed. Groups That Work (And Those That Don’t). Jossey Bass, 1990.

Nonmonetary Compensation (chapter 14). Gibbs, Michael, and Wallace Hendricks. "Are Formal Salary Systems a Veil?" Working paper, University of Southern California and University of Illinois, 1997.

Lesson Preparation

All assignments should be submitted on standard-sized paper (8½ x 11). Typed answers are preferred (double spaced), but legible hand-written assignments are also acceptable. In either case, be certain to put your name at the top of each page. The recommended way to prepare your lesson is as follows:

Read carefully the assigned pages in your text.
Read the Discussion, but keep in mind that this section is where I highlight the sections in your text I consider most important for you to know. These are the points I would stress if we were in a classroom environment. Always read the discussion after you have read your text as a supplement to what you have already read; never rely merely on this section. This section will help you when preparing for the midterm and final examination as it is a compressed version of what your book writes and elaborates on the sections I consider most important.
After reading both your text and the Discussion, read over the questions in the Written Assignment and try to answer them with your book closed. The questions are designed in such a way that you must think and apply what you have learned from each section to correctly answer them. Copying directly from the textbook may result in a failing grade for that exercise.
If you cannot answer a question, reread the relevant section of the book.
Your assignments will be the most useful tool in reviewing for the final examination, so keep them!!!
Proofread each assignment before submitting it.
Generally, wait until your previous lesson has been returned before sending in the next one; often I will make comments to help redirect your efforts.
Essay questions should be answered precisely and comprehensively. Don’t use just a sentence or two. Think before you write.
DO NOT send in incomplete lessons — that is, with some questions not answered at all. If you do, your entire exercise may be returned.
The Written Assignment in Lesson 1 asks that you write a 2–3 page paper. Again, typed papers are preferred, but if you must hand-write it, make sure your writing is neat. Make sure to answer all the questions I specifically ask you, as well as adding your own (relevant) thoughts. Write logically and to the point, because what you write is the only basis I have for assessing just how well you understand the material.

Examinations and Grading

Information about the midterm and final examinations is provided in this course guide immediately following Lessons 5 and 11. You must complete the midterm before proceeding with Lesson 6. The midterm examination will count twenty percent of your overall grade, and the final examination will count thirty percent.

You will receive a letter grade (A, B, C, D, or F) for each of the eleven lessons in this course. The lessons will count equally in determining your average. The average will comprise fifty percent of the overall grade.

Once you have completed all the lessons in this course, you should begin the review process for the final examination. You must pass the final examination to pass the course, regardless of grades earned on lessons. You are responsible for knowing and abiding by Independent Study policies and procedures. See your Student Handbook for detailed information.