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The VMP of each worker

January 14, 2015| Papers Haven

The VMP of each worker

Workers start at firm A when they are 18. The VMP of each worker remains $18 throughout their work life.

Given the firm’s concern that workers shirk, they start workers at $10 and increase the pay by $0.40 each year they are on the job. Assume that the firm does not have a pension plan and r=0 for all workers.

(i) For what ages will workers be paid above their VMP?

(ii) Show whether this firm opposes legislation prohibiting mandatory retirement for workers under 65.

(iii) At what age would they begin to oppose legislation?

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