Above-equilibrium wages paid by some employers as an incentive for better performance are called compensating differentials.

Question

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Compensating differentials refer to wage differences across jobs that compensate workers for the non-monetary characteristics of different jobs, such as risk or undesirable hours, not for better performance. Above-equilibrium wages paid as an incentive for better performance are often referred to as efficiency wages.

Above-Equilibrium Wages Paid by Some Employers as an Incentive for Better