Labor, GDP and the Firm
Labor is an important factor of production for all firms. The most recent unemployment rate is estimated at 9% (January 2011). Economists have identified three types of unemployment. Which type would affect Wal Mart? Explain.
Fractional unemployment would have a major impact on Wal Mart. This is because the majority of Wal Mart's employees will receive salaries at minimum wage levels. In the event that someone quits, these individuals can easily be replaced (thanks in part to the high unemployment rate). The real danger is when the unemployment rate begins to decrease and more people are working in career orientated fields. This will make it difficult for Wal Mart to maintain their lowest cost structure. It is at this point that the company could be forced to pay higher forms of compensation for attracting and retaining employees. This is when the firm's profit margins will decrease from the tight labor markets. (Rampwell, 2010)
Moreover, structural unemployment is a secondary challenge that could have an impact on Wal Mart. This is because the introduction of technology will reduce the total number of employees working at each location. Over the course of time, this can result in a decrease in the workforce. (Rampwell, 2010)
Think about other employment...
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