In any particular country, production of goods and rendering of services require labor as a resource. Increase in the amount of labor enables the particular country to produce more goods. Labor productivity in underdeveloped country can be improved through the following;

Advice for Increase in Productivity of Country’s Labor Force

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Investment in Innovation Policies

Underdeveloped countries should adopt and embrace new technology in their teaching and working institutions. The country should invest in human capital to facilitate the adoption of new technologies since it will enable a country behind the world technology frontier rapidly grow in terms of labor productivity.

Institutions and Policies

Institutions and policies play a vital role on labor productivity either since they influence capital deepening and accumulating human capital or their effect on technological change. As an advisor to the president, I would suggest for a competitive product market to facilitate MFP growth. I would encourage work place training to ensure that workers obtain relevant skills as required by the employer. I would advocate for policies that aims at influencing the workers incentives according to level of training and education.

The country should reduce the opportunities that enable companies to replace temporary workers with permanent workers and ensure training for temporary workers and increase in their incentives. The president should introduce subsidized employment and work experience programs that increase the work duration and hence the human capital stock acquired while on job.

I would suggest that he president introduce centralized wage-setting to ensure compressive wage relativities that reduce poaching while giving companies incentives to train workers. This would ensure the structural adjustment in making the deteriorating companies to make low relative profits and emerging companies make more profits as opposed to decentralized wage fixing policies.

Technology Change Effect on Change the Demand for Labor

Advancement in technology has brought a significant change in the labor market. Basing our study on various perspectives we will find the direct effect of technology growth on the labor market. Labor market if greatly affected through the retirement of order workers and is much influenced by the technology which they are not familiar with. The second area that is affected by the technology is the skill acquisition of workers who are young. The last sector influenced by technology is inter-industry wage structure. Considering the above areas we will also find the contribution of the technology towards the level of inequality among the workers and how it affects the labor market.

Technological Change and Retirement Decisions

In most cases technology affects the labor market in two major ways; through change in technology on the rate of depreciation of the stock of human capital and also through the change in technology on the amount of on-the-job training. The effect of technology change on the level of on-job training is dependent on the relationship between the marginal return to training and the substitutability between training and schooling. With a positive correlation between on-job training and technology change, prediction by human capital theory shows that “ceteris paribus” the individuals working in industries that are much technologically advanced will retire later as opposed to those with lower rates of technological change. Despite this effect, human capital in industries with higher rate of change in technology will depreciate at a faster rate leading to lower optimal level of investment with an earlier retirement.

On the other hand, rapid rate of technological change is more likely to influence the retirement decisions. In such a case, the increase in change in technology will have an influence on the deprecation rate of human capital stock causing a revised rate of human investment capital. Under such situation, old aged workers will find it hard and are more likely to resist revision of their investment in human capital inducing retirement that is earlier than it could have been.

It is evident that people working in industries experiencing higher rates of technological change will opt to retire later as compare to hose workers who are in industries with low rates of technological changes. On the other hand, unexpected increases in technological changes rates will lead to an earlier retire of most of the workers above 65 years of age.

In a case where the workers decide to retire other than acquire the new skills, the situation leads to an increase in labor demand in order that the company acquires the skills required. This situation is due to immediate replacement of workers to obtain new work force with the required technological skills.

In cases where the companies adopt on-job training programmes, the situation leads to workers already in the companies acquiring the new techniques hence reducing the chances of new employment. In such a case the companies experience reduced rate of labor employment.

Technological Change and the Skill Acquisition of Young Workers

Technological change or advancement is more likely to influence the incentives of the workers and employers since the results of demand and supply results to the investments in trainings of these personnel. Advancement in technology makes the already acquired skills and formal education outdated in manner that new skills and techniques should be employed to ensure smooth running of a business. For the workers and employers to adopt the change in technology, they will have to invest in training while on the job for them to acquire the particular requirement as demanded by the new innovation. Since the general level of education just enables workers to be dynamic in case of a technological change, for workers to adopt to a higher technological change, they require much rely on the school acquired knowledge other than on-job training. As an example, personnel in manufacturing departments receive formal and frequent company training consistent with the change in technology making the companies and workers to invest much on trainings to obtain the new technology requirements for them to fit in the job. More educated workers seem to obtain more training since companies believe that human capital is the basic input to the production. An attempt by the companies to get workers with updated skills from schools increases the demand of labor hence more personnel are employed to cater for the demand.

Technological Change and the Interindustry Wage Structure

There exist a positive relation between a change in technology and wages of more educated as compared to less educated workers in industries. The wages of workers in industries with higher rates of technology are higher compared to others. This reflects the possibility of high-tech industries sorting more skilled workers who are more technologically trained.

Wage Equilibrium

Anyone intending to work at equilibrium wage has high chances of securing job since at this level the cost of workers is neither too high nor too low thereby reducing the threats of unemployment. Most firms focuses on maximum profits through maximum production, for this reason, they tend to employ workers on the basis production costs which is intended to be as low as possible. Also, people are attracted to well paying job, the wage offer at equilibrium may be low and hence discouraging opportunistic workers, for instance, in the case whereby the aspects of a decent living that were not considered in estimating the minimum wage are extremely expensive such as travelling costs . Therefore, one cannot be absolutely certain of ever getting a job at equilibrium wage f a competitive labor market.


Total production at 15 workers is 70 and total at 20 workers is 100, therefore, the marginal production at level of 20 workers is:


Comment on the Total Production of Cars as More Workers are Added

As more workers are added the total production of cars increases and reaches the maximum number in which further addition of workers does not contribute to increase in the production of cars rather it results into losses due to diseconomies of scale.

The workers hired initially have high productivity and as few more are added production increases. This because, the workers specialize only in work that fit them the best and also they have adequate machines, offices and other resources thus increasing their productivity. Nevertheless, as more workers are added, it does not result into an increase into the number of cars produced. The ability to specialize diminishes as more workers are added. Moreover, in the short run of the industry, the number of machines and offices remain fixed thence more workers reduce the comfort in which they work and limit their productivity. On the other hand, in the long run the company develops and grows too large in order to accommodate more workers and increases production levels, but in the process it may lose efficiency resulting into a decrease of average and marginal production. When this happens the company experiences diseconomies of scale and decreasing returns to scale.

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