Question

Explain why increased hiring from the pool of previously unemployed labour should usually be treated as cost and NOT a benefit, and then discuss how we might conceptually assign a money value to the opportunity cost of their time. Briefly describe the commonly suggest methods and evaluate their validity.

Answer 1

The pool of unemployed labour is considered a cost and not a benefit because, these unemployed labourers are a pool of already educated and experienced in a certain field of work and workplace. So re hiring them involves reconditioning them to a different environment and making them unlearn previous practices so that they can adapt to a new environment. This re education involves a heavy investment/cost in the beginning and not any benefits initially.

The opportunity cost can be equated to the cost borne by labourers when they give up on other employment or career enhancement opportunities and the cost borne by companies in re educating them in the field and new environment. The money value can be attached by the difference in income earned today and expected income from other opportunities and also by the cost borne by investing in rehiring them by the firms.