You are a manager at Zappos and responsible for shipping, and receiving. You hav

Question

You are a manager at Zappos and responsible for shipping, and receiving. You have 17 workers who package goods and 6 who record and notate the inventory as it gets taken from the shelves and ships. You pay the employees who package the material $7.25 per hour, the minimum wage in your state, and the other workers $9.75 per hour. Minimum wage is going to increase on September 1 to $8.15 per hour. Discuss the implications of this legislative change on you operations. Specifically discuss the implications for your optimal mix of inputs and long-run investment decisions.

Explanation / Answer

Increase in minimum wage rate decreases the demand of workers who package food because now firm has to pay more for them. So, firm will hire less number of workers for the same job, this means it will cut its workers from 17. Firm will prefer to employee more workers who record and notate the inventory. So, input of firm in the form of workers decreases and in long run, firm investment decision should be based more on workers who does not perform packaging function rather firm prefer to hire some more workers who record and notate the inventory and take the packaging work from them only and cut the employment of packaging workers.

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