The Bureau of Labor Statistics showed an astonishing 5 percent gain in productivity in 2001’s fourth quarter. Some argued that technology had again made the economy more productive than ever before....

· Longer hours. It is estimated that 20 percent of the workforce spends more than 49 hours a week on the job – mostly professional and white-collar workers.

· Reclassifying workers as managerial. Class action suits charging that firms are misclassifying jobs to skirt overtime pay are on the rise.

· Loading up on temporary workers. The ranks of temps grew 56 percent during the boom years – a just-in-time workforce that receives no severance pay and no benefits. The temps have been the fastest growing segment of employment in 2002.

· Making less do more. Firms are shrinking the workforce without reducing workloads. They are also forcing employees to work harder to increase sales.

· Shifting risk. Pay is increasingly tied to company performance. That saves money when profits disappear while spurring harder work.

This is all well and good for the present but what happens when the economy rebounds? The spectre of tight labor markets in the future coupled with the feeling of exploited workers with long memories, does not auger well for those firms who are seeking enhanced profits right now.

Source: Michelle Conlin, “The Big Squeeze on Workers,”
Business Week, May 30, 2002, p. 96.

Questions:

1. Does this case illustrate the law of diminishing marginal productivity?

2. In this case, less and less of a single factor, labor, is being used. Does this have anything to do with the law of diminishing marginal utility?

3. Does the case distinguish between long-run and short-run profits?

4. Does the case distinguish between long-run and short-run production costs?

5. If you were an employee of one of these companies, what would your behavior be when the economy turned for the better?

Write your answers in a paper of no fewer than 500 words.