Labor demand and productivity

The best level of employment for a firm is contingent on a number of factors such as the cost of labor for the productivity of the work force, the level of production and the price the firm can charge for its product. The labor and productivity forces the employer’s decision whether it is simple or complicated based on the real world.

The standard model of labor demand in economics is based on the theory of demand. Before we can master the economics theory of demand - we believe every firm’s first goal is to maximize dollar profits. The second is production which is based on capital and labor to produce the product. Third the firm must be competitive by having competitive product and labor markets. The importance which the firm relies on is those of both the price the firm can get for its products and the wage rate it has to pay for labor. Both are unaffected by changes in its individual production and hiring decisions controlling those costs. The only cost of labor has been the main goal of many firms - MTA in our current contract negotiations has revealed that it is interested in controlling the cost of labor. We in TWU Local 100 are seeking a fair contract with the Cost Of Living Allowance clause.

How many workers should a firm hire? Economic theory suggests a simple answer - hire additional workers as long as each one adds even so much as dollar ($1) of extra profit to the firm. This solution is so simple and it is so basic as long as the benefits exceed the cost from that activity which would be favorable to the firm management. It is also that the firm wants to maximize profits (profits are the difference between revenue and cost) which determine increase in revenue from hiring one more worker and compare it with the increase in labor cost of that last worker. As long as additional workers bring in more revenue than the cost of hiring them the firm adds to its profit by increasing employment. If the last worker added by the firm brings revenue no greater than the labor cost, hiring stops due to the fact that the profits will be at a maximum - these principles are more favored in private sector. Since MTA is a public agency we in TWU Local 100 do not agree with that approach. However, current CEO Joseph Lhota appears to be utilizing those above principles. We in TWU Local 100 are seeking a fair contract with no lay off clause.