A 10 percent three-year wage increase is provided as a 2 percent increase in the first year, 3 percent in the second year, and 5 percent in the third year. This is an example of a ________ contract.
fixed
To find the answer to your question, we need to understand the different types of contracts. One common type of wage contract is a step increase contract. In a step increase contract, the wage increases are predetermined and occur at specific intervals or steps.
Now, let's calculate the total wage increase over the three-year period based on the given percentages.
To find the total increase, we multiply the base wage by the increase in each year and add them up. Let's assume the base wage is $100.
Year 1 increase: 2 percent of $100 = $2
Year 2 increase: 3 percent of ($100 + $2) = $3.06
Year 3 increase: 5 percent of ($100 + $2 + $3.06) = $5.26
Total wage increase over three years: $2 + $3.06 + $5.26 = $10.32
Since the wage increase percentages are predetermined and occur at specific steps (2 percent in the first year, 3 percent in the second year, and 5 percent in the third year), this is an example of a step increase contract.