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

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

Due to the increase of minimum wages from $ 7.25 per hour to $ 8.15 per hour, the total cost of production would increase by $ 15.3 per hour (17 workers * $ 0.90 per hour).

This implies that Zappos cost of production would increase substantially. Due to this, we would have to decrease the number of workers in order to keep the business profitable. Thus, there would be a decrease in the productivity.

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