Discussion Question

Sometimes students in previous classes responding to this case study have mentioned things like company parties, flex time, special recognition for achievements, or other benefits. Suppose a company funds a party for 100 employees that costs $4,000. How do we know that the party is incentivizing employee productivity more than simply giving each employee a check for $40?

 

One of the things that economists have pointed out is that the marginal product of labor tends to increase as the quantity and quality of capital (tools) increases. As there is more capital to work with, workers can be more productive. Think about the marginal productivity of a worker with a shovel as opposed to that same worker with a backhoe. So one thing that employers could do to increase the marginal product of workers is to provide more capital.

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