Question
The table below gives the characteristics of workers of various ages at your firm. W represents the wage they receive (assumed to be the same
The table below gives the characteristics of workers of various ages at your firm. W represents the wage they receive (assumed to be the same across all ages for simplicity). A represents the workers best alternative salary. K is the workers annual productivity at your firm. Also given are the present values of W, A, and K (which represent the discounted sums of those variables from the current age until age 65. An assumption here is that every worker will continue to work somewhere through age 65). a. Ignore the final two columns for now. Is there any worker that the firm would like to layoff or leave the firm? If so, which ones (in terms of age)? b. Now assume that the firm has hit some rough times due to declining demand for their product. The productivities (and present value of future productivities) all decline by a fact of beta. These are shown in the final two columns. Which workers, if any, will the firm find it beneficial to offer a buyout to? Which workers, if any, will be willing to accept a buyout that the firm is willing to offer?
\begin{tabular}{lllllllll} \hline Age & W & A & K & PV(W) & PV(A) & PV(K) & K & PV(K) \\ \hline \end{tabular}
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