Douglas | Business & Finance homework help
A firm’s decision on how many workers to hire will be based upon the results of its cost-benefit assessment. The firm should consider all costs and benefits of increasing output as it aims to maximize its profits.
To begin with, the company must determine how much available capital is. This will greatly influence their ability to add more workers. Once the firm has sufficient capital, it can decide on how many workers to employ. To do so, the firm must weigh up whether employing an extra worker would cover that worker’s wages and other associated costs such as benefits or training expenses; if not, then adding an additional employee wouldn’t be beneficial for profitability and could even reduce it.
It may also be necessary to consider production methods and technologies. For example, will new technology offer a better return on investment than adding more workers? Consideration should be given to the possibilities of automating production or using lean manufacturing methods, which can increase productivity and reduce staffing costs. Furthermore, when considering labor costs, it is important that firms take into account external factors such as minimum wage laws and labor market conditions – if wages are high then fewer employees may need to be hired in order to make a profit margin acceptable.
The number of employees that a company decides to employ is heavily influenced by financial calculations based on cost-benefit ratios. Assessing labor market conditions, technological advances and other factors can inform staffing decisions.