2. Classification of Benefits, Costs and Disbenefits
• The method for selecting alternatives that is most commonly used by federal agencies
for analyzing the desirability of public works projects is the benefit/cost ratio (B/C ratio).
• As its name suggests, the benefit cost method of analysis is based on the ratio of the
benefits to costs associated with a particular project.
• A project is considered to be attractive when the benefits derived from its
implementation exceed its associated costs.
• Therefore, the first step in a benefit cost analysis is to determine which of the elements
are benefits and which are costs.
• In general, benefits are advantages, expressed in terms of dollars, which happen to the
owner.
• On the other hand, when the project under consideration involves disadvantages to
owner these are known as disadvantages.
• Finally, the costs are the anticipated expenditures for construction, operation,
maintenance etc. less any salvage values.
3. Benefits, dis-benefits and cost calculations of a
single project
• Before a Benefit Cost ratio can be computed all the benefits, dis-
benefits and costs that are to be used in the calculation must be
converted to common dollar units, as in present worth or future
worth calculation or dollars per year.
• It is important to express the numerator (benefits, dis-benefits) and
denominator (Costs) in same terms such as present dollars or future
dollars.
• There are several forms of the benefit cost. One of the most widely
used method is conventional benefit cost ratio, which can be
calculated as follow.
4. • A B/C ratio greater than or equal to “1” indicates that the project
evaluated is economically advantageous.
• In B/C analyses costs are not preceded by a minus sign.
• Note that in the above equation (formula) dis-benefits are subtracted from
benefits.
5. The modified B/C ratio
• The modified B/C ratio, which is gaining support, includes operation
and maintenance (O&M) costs in the numerator and treats than in a
manner similar to dis-benefits.
• The denominator then contains only the initial investment cost.
• Once all amounts are expressed in present worth, annual worth, or
future worth terms, the modified B/C ratio is calculated as
6. • Any salvage value is included in the denominator as in conventional
method.
• The modified B/C ratio will obviously yield a different value than the
conventional B/C method.
• However, as with dis-benefits the modified procedure can change the
magnitude of the ratio, but not the decision to accept or reject.
7. Example
• The Wartol foundation, a nonprofit educational research organization is
contemplating an investment of $1.5 million in grants to develop new ways to
teach people the rudiments of a profession. The grants would extended over a 10
year period and would create an estimated saving of $500,000 per year in
professor salaries, student tuition and other expenses. The foundation uses a rate
return of 6% per year on all grants investments. In this case, the program would
be an addition to ongoing and planned activities. An estimated $200,000 a year
would, thus, have to be released from other programs to support the educational
research. To make this program successful, a $50,000 per year operating expense
would be incurred by the foundation from its regular O&M budget. Use the
following analysis methods to determine if the program is justified over a 10 year
period.
• (a) Conventional B/C
• (b) Modified B/C.
8. • Solution:
• The definitions using equivalent -
annual worth basis are
• Benefits = 500,000 per year
• O & M Costs = 50,000 per year
• Dis-benefits = 200,000 per year
9.
10. LABOR PROBLEMS
• Labor problems can be viewed as chain of causes and effects that are
indivisibly linked by economic, political and cultural factors. Only a
comprehensive analysis of these problems can equip workers with
the tools for mastering them.
• Thus we need to understand the structural, historical, and moral
dimensions of labor problems.
11. COMMON PROBLEMS CONFRONTED BY
WORKERS AT THEIR PLACE OF WORK?
Low Wages
• The fist and major problem worker face is the problem of low wages. The
wage rate in the Pakistan is way behind those in developed countries. So,
steps are needed to raise the living standard of workers.
Poor Working Conditions
• Forced to suffer under poor working conditions in exchange for
unemployment and eventual starvation, workers have long been deprived
of the right to life and duty to work. Inadequate physical facilities and
occupational safety measures exposure to hazardous chemicals,
unreasonable work schedule, unjust compensation, inadequate leave
benefits, limited, if not absence of opportunity for personal and
professional growth, and unstable employment status – these are but a few
of the unjust working conditions that burden workers.
12. Inhumane Treatment
• Directly related to poor working conditions are oppressive practices inflicted on workers
by employers who look down on labor as mere material instruments of capital
accumulation. Inhumane practices of employers include failure to implement wages and
compensations as prescribed by law, sexual harassments, physical abuses, illegal
dismissals, and other problems emanating from poor working conditions.
Absence of Job Security
• Two conditions highlight the absence of job security in the work force.
• First is the escalating number of unemployed workers who command cheap wages for
limited and small number of employment opportunities.
• Second is the initiation of automation that displaced and replaced many workers because
employers choose speed and accuracy in production rather than the creative efforts that
shall flourish once labor is relieved from the drudgeries of work.
Underemployment
• It is unfortunate to note that the government is unable to tap the ingenuity,
craftsmanship, intellectual prowess, and industry of the labor force as vehicle of national
development and economic recovery. Thousands of workers take jobs that neither utilize
nor enhance their skills and academic training. College degree holders performing
functions that used to be reserved for janitors, clerks, messengers, drivers, even
domestic helpers are not an uncommon sight nowadays.
13. Unorganized Labor Force
• The organized sector of the labor force is still a minority. Although the
number of unionized workers is rising but is not considerable.
Discrimination
• Discrimination with respect to sex, age, beliefs, and race still exist in the
areas of hiring, promotion, and compensation. The rate of unemployment
of women is higher than of men. Quite a number of establishments refuse
to hire women.
• Age consideration is another discriminating factor. Although the Labor
Laws defines the legal age brackets for employment, many establishments
still prefer employing workers who are neither too young not too old.
• Finally, the issue of racial discrimination has become a disturbing reality for
workers who are forced to take unskilled jobs as domestic helpers and
laborers even if their educational attainment and experience prove that
they are over-qualified for the work the take.
