Limitations of the Rational Actor Paradigm?

https://www.washingtonpost.com/news/wonk/wp/2016/03/15/why-we-should-give-up-trying-to-make-people-less-sexist/ dicusses how biases exist and how the difficulty in removing them. It talks about problems and solutions when making employment decisions and during negotiations.

What determines salaries?

Why There is No Science in Your Salary
by: Lauren Weber
Aug 03, 2016
Click here to view the full article on WSJ.com

TOPICS: Labor Economics

SUMMARY: An improving labor market and fair-pay laws are prompting companies to rethink the way they set salaries and, in some cases, implement a formal compensation structure or philosophy to guide their decisions. Related article 1: The ad hoc process of making salary decisions based on factors like a candidate's competing offer or the budget handed down by a distant finance team is looking less tenable to a lot of human-resources executives. Related article 2: Questions about pay equity may be moving into the boardroom. Among nonemployee corporate directors, women and minorities make less than their nondiverse counterparts, according to latest research.

CLASSROOM APPLICATION: Instructors can use the articles to introduce important practical issues in salary determination, paying particular attention to pay equity. One point is that pay is determined as a function of job and market data and managerial discretion. Pay inequities can creep into salary determination mostly through the use of managerial discretion.

QUESTIONS: 
1. (Advanced) How should prior salaries be used in determining salaries of new employees?

2. (Introductory) Why did female hires at Google in 2015 receive a 30% bigger raise over their prior salary than male new hires?

3. (Advanced) Should employers use data from the labor market when setting salaries? Should employers respond to offers made by other firms to attract star employees?

4. (Advanced) Is setting salaries an art or a science? What does it mean for an economic process to be an art?

Reviewed By: James Dearden, Lehigh University

RELATED ARTICLES: 
What is the Best Way to Pay Workers?
by Lauren Weber
Aug 03, 2016
Page: B6

Pay Inequality Poses a Concern in Boardrooms, Too
by Rachel Feintzeig
Aug 03, 2016
Page: B6

How changes in wages and technology affect employment decisions

At Western Firms Like Adidas, Rise of the Machines Is Fueled by Higher Asian WagesAt Western Firms Like Adidas, Rise of the Machines Is Fueled by Higher Asian Wages
by: Kathy Chu and Ellen Emmerentze Jervell
Jun 10, 2016
Click here to view the full article on WSJ.com

TOPICS: International Trade, Manufacturing

SUMMARY: Global companies, such as Adidas, are doing more manufacturing closer to home thanks to advances in automation and increasing pay demands from workers in the developing world.

CLASSROOM APPLICATION: Students can evaluate the effect of innovation in manufacturing processes (i.e., increased automation), wages in the developing world, and the marketing benefits of manufacturing closer to home on the decision by companies to move manufacturing from the developing world to their home countries.

QUESTIONS: 
1. (Introductory) What is the effect of increased manufacturing in the developing world on wages in these countries?

2. (Advanced) Why is automation critical for companies to move manufacturing from the developing world to their developed countries?

3. (Advanced) What is the effect of increased wages on the mix of capital and labor used in production processes?

Reviewed By: James Dearden, Lehigh University

Optional material for Employment Decisions

1. Watch Charlie Chaplin in Modern Times. It shows what happens when the speed of the conveyor belt is the variable input and the number of workers is fixed.
2. Read How to ask for a raise.
3. Clifford on total and marginal product
4. Clifford on marginal product and marginal cost
5. Clifford on marginal, average variable, average total, and average fixed cost curves
6. Clifford on wage and employment decisions for a single input
7. Clifford with an example of optimal input decision for a single input
8. Clifford with old AP question on productivity and employment. The last part looks at cost minimization holding output constant.
9. Kahn on optimal level of employment single factor

Wal-Mart's pay scheme

This article in Reuters may be of interest, especially to the group that analysed Wal-Mart's pay scheme. It reports that Wal-Mart is increasing the lowest wage paid by the firm to $9 and then to $10. Here are some interesting questions to answer.

1. Why is Wal-Mart increasing wages at this time?
2. What benefits does Wal-Mart anticipate as a result of the increase?
3. How will the increase affect profitability in the short run? In the long run?

Here is the WSJ's article.