The ability to stretch to accommodate more workers in an organization solely relies on the amount of profit that the company can make. The firm considers the income generated from the profiting activities. The company can absorb more employees to further the production, distribution, and internal management of the organization. Further, the growing technological innovation and research enable a firm to reduce the workload and execute duties with some ease. The phenomenon sees some employees laid off because the automation of responsibilities is more efficient and cheaper than paying the workers. The organization looks for methods of releasing the workers without interfering with their welfare. The consideration incorporates the labor laws and the budgetary capabilities.

The trade organizations, whose primary responsibility is to ensure that the welfare of the member employees is adopted, consider situations of low elasticity of demand. The strength ended on trade unions relies on the number of members. Low demand elasticity means that the unions will not have an increase in membership. It is typically taken that the unions’ mechanism of creating a wage premium is through direct interaction with the member workers. However, the ability to negotiate for a good pay also depends on the number of the uncovered workers because the non-members can initiate a strike to equity. Further, the employers present their demand elasticity to the trade unions for consideration. The underlying economic conditions of the firm dictates how the low elasticity of demand will affect the employee absorption. The managers have to forecast on the forthcoming issues to maintain relations with the trade organizations. Nevertheless, the employers have to initiate mechanisms of cushioning artificial inflation and its impact on the firm. The economic surge disintegrates demand elasticity, hence pushing the business to the edge of collapsing.

According to Edquist et al., (2001) low demand stretch measures the responsiveness of the need for labor and the wage rate presented by the market. Edquist et al., (2001) assets that the responsiveness leans on the labor costs and the percentage of total costs. High proportions of labor as compared to the total expenses increase the stretch. The employers have to balance the ratio of total costs to avoid burdening the other production factors. Furthermore, the cost and the ease of factor substitution affects the low demand elasticity (Edquist et al., 2001). When the firm faces great replacement and difficulty in substitution of production factors, low demand elasticity is experienced. The situation calls for low wages for the already absorbed workers.

The criteria for lowering minimum wages raises severe challenges to the employer because the trade unions will initiate pushing mechanisms of disallowing the issue. However, trade organizations are compelled to consider situations whereby the employer needs specialized labor. The wage for skilled employment is subject to negotiation. The unions will not influence in such circumstances. The employer can also set the rate for the specialized work. Further, this kind of work lowers the demand elasticity and disadvantages many workers (Morton & Goodman, 2003). The employer should also consider the final output from the business and compare it with the price demand elasticity. The data from the products and their selling prices as contrasted with the production cost determines the wage rate that the employees will be capped.

In summary, low demand elasticity is of great significance in determining the wage rate. The rate at which the employees are paid is set out in the job description and the labor market. However, the trade unions can push the employers to consider the employees’ welfare by increasing the pay rate. The general employment outcomes as orchestrated by the low demand elasticity is subject to the profit made by the firm. The labor low both factors the employer and the employee because the boss cannot be compelled to retain or employ more workers in low demand elasticity situations.